Fannie Mae: Public or Private?

By: Cole Bolton and David A. Moss

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Synopsis: In 1987, President Ronald Reagan established the President's Commission on Privatization to identify federal government functions that could be shifted to the private sector. One agency that the Commission considered was the Federal National Mortgage Association, or Fannie Mae. Fannie Mae was a Depression-era creation that was charged with establishing a secondary market for home loans. By purchasing qualifying residential mortgages from individual home loan issuers, Fannie Mae provided these institutions with funds for the continued issuance of mortgages, thereby promoting the government's goal of increased homeownership. Although lawmakers had already partially privatized Fannie Mae in 1954 and again in 1968, the agency in 1987 still retained close links to the federal government, including an emergency line of credit from the U.S. Treasury. After its deliberations, the President's Commission recommended Fannie Mae be restructured into a fully private firm. Now it was up to Congress and the President to decide whether to accept and implement the Commission's findings.