How Fannie Mae & Freddie Mac Were Taken Over By The Government

Peter G. Miller • January 1, 2019

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In the summer of 2008 the federal government said at the height of the mortgage crisis that Fannie Mae and Freddie Mac had unfledged assets of $1.5 trillion. On September 7, 2008 the government announced that it was seizing control of Fannie Mae and Freddie Mac.

A Few Weeks Later

On September 7, 2008 the government announced that it was seizing control of Fannie Mae and Freddie Mac. Treasury Secretary Henry Paulson said the conservatorship was justified for several reasons:

In July, Congress granted the Treasury, the Federal Reserve and FHFA new authorities with respect to the GSEs, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500). Since that time, we have closely monitored financial market and business conditions and have analyzed in great detail the current financial condition of the GSEs – including the ability of the GSEs to weather a variety of market conditions going forward. As a result of this work, we have determined that it is necessary to take action.

Based on what we have learned about these institutions over the last four weeks – including what we learned about their capital requirements – and given the condition of financial markets today, I concluded that it would not have been in the best interest of the taxpayers for Treasury to simply make an equity investment in these enterprises in their current form.

Since this difficult period for the GSEs began, I have clearly stated three critical objectives: providing stability to financial markets, supporting the availability of mortgage finance, and protecting taxpayers — both by minimizing the near term costs to the taxpayer and by setting policymakers on a course to resolve the systemic risk created by the inherent conflict in the GSE structure.

The four steps we are announcing today are the result of detailed and thorough collaboration between FHFA, the U.S. Treasury, and the Federal Reserve.

Filed in: News • Tags: $1.5 trillion in assets, conservatorship, Fannie Mae, Freddie Mac, GSE

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Peter G. Miller is a nationally-syndicated columnist who appears in dozens of newspapers. A long-time Washington correspondent with experience at the White House and on Capitol Hill, Mr. Miller is the author of seven books published originally by Harper & Row, one with a co-author.

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