Government-sponsored mortgage companies are growing larger and riskier in service of social policy.
During the financial crisis, the federal government bailed out several financial institutions. But two in particular, Fannie Mae and Freddie Mac, the government-sponsored mortgage giants, stood out. Taxpayers shelled out $191 billion to support them — combined, this was the largest bailout in American history — and for the past decade and a half the two institutions have been under government control.
Americans who thought the government would rein in Fannie and Freddie after their failures were sorely mistaken. The companies have only gotten larger. The Biden administration in particular has tried to make Fannie and Freddie bigger, and the result will be to make them riskier. At some point taxpayers will suffer the consequences again.
Only in government would a spectacular failure lead to a massive expansion in responsibility. In 2006, Fannie and Freddie, along with their smaller cousin Ginnie Mae, supported about 40 percent of all outstanding single-family mortgage debt. They now support over 65 percent. Fannie and Freddie today have $7.5 trillion in assets: an all-time high.
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Judge Glock is the director of research and a senior fellow at the Manhattan Institute and a contributing editor at City Journal.
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