Eighteen years ago on September 7, 2008, the US government made a public announcement about a sweeping intervention to rescue Fannie Mae and Freddie Mac, two mortgage-finance giants whose troubles had become a threat to the country’s housing market and wider financial system.The Federal Housing Finance Agency (FHFA) and the US Treasury publicly announced that Fannie Mae and Freddie Mac had been placed under government conservatorship. The companies had formally entered conservatorship a day earlier, on September 6, with the consent of their boards.The intervention came as the US housing market was collapsing and mortgage defaults were mounting, setting the stage for the global financial crisis.
Why the takeover mattered
As the housing downturn deepened, losses mounted at Fannie Mae and Freddie Mac, raising concerns about their ability to meet their financial obligations and continue supporting the mortgage market.The stakes were high. Allowing either company to fail could have disrupted a major source of mortgage financing, unsettled investors holding their debt and mortgage-backed securities, and added further pressure to an already weakening housing market.The government therefore stepped in to prevent the two companies’ financial problems from becoming a broader shock. On September 6, 2008, FHFA placed both into conservatorship, taking control of their management, boards and shareholders. The companies, however, continued operating as corporations.The Treasury also agreed to provide financial support, effectively creating a government backstop that allowed Fannie Mae and Freddie Mac to continue meeting their obligations and supporting the mortgage market.The intervention helped contain the immediate threat posed by the two mortgage giants, but it did not end the financial crisis. Just eight days later, Lehman Brothers filed for bankruptcy on September 15, intensifying turmoil across global financial markets.Thus, ultimately, what was initially viewed as an emergency measure has lasted nearly two decades.Fannie Mae and Freddie Mac remain under federal conservatorship in 2026. FHFA continues to oversee them, while Treasury provides financial support under agreements first signed on September 7, 2008.The Treasury has since invested heavily in the companies. According to a Yale case study, the two firms ultimately received a combined $191.5 billion in Treasury investments between 2008 and 2017.In January 2025, Treasury and FHFA amended their agreements to address the eventual release of Fannie Mae and Freddie Mac from conservatorship, but the companies have yet to leave government control.Even president Donald Trump has revived the possibility of taking the two mortgage giants public, although there is no confirmed timeline for an offering.Trump had tried to end government control of Fannie Mae and Freddie Mac during his first term.Then, in June, after appointing FHFA Director Bill Pulte as acting director of national intelligence, Trump was asked whether Pulte’s new role meant an IPO was off the table.“No, it’s not. We’re thinking about an IPO for that. It’s not a rush,” Trump said, adding that Pulte would remain at FHFA.The potential move comes with significant challenges. Fannie Mae and Freddie Mac remain deeply embedded in the US mortgage market, buying mortgages from lenders and packaging or guaranteeing them for investors. Experts have warned that removing the government backstop without a carefully structured replacement could increase risk for mortgage-backed securities investors and ultimately push up borrowing costs for homebuyers.
How housing crisis became a financial crisis
The US had experienced a major housing boom in the years before 2008, fuelled by expanding mortgage credit and rising property prices. Thus, when house prices began falling, borrowers increasingly struggled to repay their mortgages, while lenders and investors faced mounting losses.The Federal Reserve later described the end of the US housing boom and the rise in subprime mortgage delinquencies as the proximate cause of the financial crisis. Problems in the wider financial system, including excessive leverage and underestimation of credit risks, amplified the shock.At the centre of the US mortgage market were Fannie Mae and Freddie Mac, two government-sponsored enterprises that bought mortgages from lenders and guaranteed or packaged them into mortgage-backed securities. Their role helped lenders replenish funds and maintain the flow of mortgage credit to homebuyers.By the time of the intervention, the two companies together held or guaranteed about $5.2 trillion in home mortgage debt, according to research published by the American Economic Association. Their securities were also widely held by banks, investors and financial institutions around the world.