Posted on Tuesday, April 22, 2025
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by Outside Contributor
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3 Comments
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Anyone remember back in 2008 when the housing market collapsed and the stock market crashed, with many tens of millions of Americans seeing their lifetime savings nearly wiped out?
Apparently the politicians in Washington are suffering amnesia — even though it was the worst crash since the Great Depression.
What else has been conveniently forgotten inside the swamp is that the institution that lost the most money and required the biggest tax bailout wasn’t any of the major banks that teetered on the verge of bankruptcy, but Fannie Mae — the government-guaranteed enterprise that insures federal mortgages and was supposed to NEVER fail. Fanny received nearly $200 billion of taxpayer rescue funds.
Fannie Mae, which now resides in one of the glitziest nearly 1 million-square-foot high-story office buildings in the Washington, D.C., area, is still in conservatorship. Hopefully, the Trump administration will move toward setting it free and severing all its federal strings.
Instead, Fannie and the housing lobby wants to expand its power by forcing taxpayers to take on tens of billions of dollars of new risk by effectively eliminating title insurance on federally backed loans and replacing it with … ta da: Fannie Mae as the de facto insurance provider on hundreds of billions of dollars of homes. What could possibly go wrong?
Title insurance ensures that when you pay $100,000 or $1 million for a new home, you are not the victim of a fraudster, and you have rightful ownership. Private title insurance typically costs a one-time fee of 0.5% to 1% of the purchase price — which is hardly price gouging.
In the last months of the Biden administration, Fannie Mae proposed a federal takeover scheme under the guise of bringing down the price of buying a home. It should have received a ceremonial burial when Kamala Harris lost the election, but Fannie and the housing lobby are powerful and relentless. They say it won’t cost the taxpayer a dime.
Uh-huh. This is what Fannie and the Federal Housing Administration said when it facilitated the low down payment loans in the early 2000s that enticed Americans into homes they couldn’t afford. Shortly before the 2008 crash, Fannie was even touting studies that concluded the possibility that Fannie would go bankrupt was one in a million. Whoops!
Make no mistake: This Fannie Mae scheme is privatization in reverse. It runs a well-functioning private insurance market out of business, replacing it with government subsidized insurance coverage.
Not only would this greatly expand Fannie Mae’s charter, but it intrudes on the traditional state oversight that ensures safety and soundness of the industry. The Trump administration is about turning power back to the states, not seizing power from them.
Congress and the Trump administration, with oversight of federal housing policy, should end this sham. Taxpayers have already been taken to the cleaners by Fannie Mae, and to quote the rock band The Who, we won’t get fooled again.
Stephen Moore is a visiting fellow at the Heritage Foundation. He is also an economic advisor to the Trump campaign. His new book, coauthored with Arthur Laffer, is “The Trump Economic Miracle.”
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