Matt Cooper has a column in the April issue of Portfolio advocating the privatization of Fannie Mae. The big problem is how to do that: for all that the US government repeatedly reiterates that there is no federal guarantee, no one believes them. And Fannie already has a stock-market listing, so the IPO route clearly doesn’t work.
I asked Matt about the practicalities of his proposal, and he pointed me to a 2004 paper by Bert Ely entitled "How to Privatize Fannie Mae and Freddie Mac". If Cooper’s proposal piques your interest, this should definitely be your next stop. It’s not easy, and it’ll take a few years, but it can be done. As a bonus, the plan involves a way of incentivizing banks to set up "mortgage holding subsidiaries" which would be more attractive than the securitization route which fuelled the subprime bubble. It’s tantalizing to think that if Ely’s proposal had been acted on, we might not be in our present mess at all.