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Wall Street Journal

Return of the Housing Monsters

America in the 21st century sometimes seems destined to repeat all of the mistakes of the 20th. The latest is President Trump's desire to release Fannie Mae and Freddie Mac from government captivity—along with a government guarantee. Didn't we learn this was a bad idea the first time? The President teased on social media recently that 'I am working on TAKING THESE AMAZING COMPANIES PUBLIC,' referring to Fannie and Freddie. 'I want to be clear, the U.S. Government will keep its implicit GUARANTEES, and I will stay strong in my position on overseeing them as President.' Their share prices surged. Investors are elated that Mr. Trump plans to re-privatize these firms—especially because he has now made their government backstop explicit. The President may think the feds can keep the housing monsters on a regulatory leash, but the political and financial incentives mean they will invariably revert to their reckless ways.