Privatizing Speculative Gain, Socializing Risk

[justaprogressive]

On May 21, President Trump said that he was giving “serious consideration” to privatizing the two giant entities that purchase mortgages on the secondary market, Fannie Mae and Freddie Mac. This could revive rampant speculation in the system of securitization of mortgages, which was the primary factor in the financial collapse of 2008. It would create a bonanza for hedge funds and private equity, which have spent nearly two decades setting up a lucrative trade. And despite the supposed “privatization,” the sums of money are so vast that government once again would be on the hook for a bailout, should the speculation cause another collapse.

In announcing the idea in a post on Truth Social, Trump himself let the cat out of the bag. “I am working on TAKING THESE AMAZING COMPANIES PUBLIC [selling them off on the stock market],” he wrote, “but I want to be clear, the U.S. Government will keep its implicit GUARANTEES.”

No! Either companies are private and accountable to markets, or they are part of the government, guaranteed by government and closely supervised by government. But private companies with government guarantees are the worst of both worlds and a bonanza for speculators.

The details get a little wonky, but the story is central to understanding both how deregulation and privatization of finance invites cycles of speculation and collapse, and how Trump is pouring oil on the flames. It epitomizes the corruption that predates Trump, and has intensified under his rule.

https://prospect.org/power/2025-06-03-privatizing-speculative-gain-socializing-risk-fannie-mae/

[justaprogressive]

1. dupe by 6 minutes nt