The State is acting like a bank
(or in Soviet Russia, you subsidize the government!)

Dean Baker blogs:

Fannie and Freddie were late to the rush into junk mortgages. Most of the junk mortgages were securitzed by private issuers of mortgage backed securities, like Citigroup and Goldman Sachs. Fannie and Freddie got into this market in a big way in 2005 because they were losing market share.

It is likely that the Republican leadership knows these facts, or deliberately has opted not to know them, but blames Fannie and Freddie anyhow because they want to associate the downturn with liberal efforts to extend homeownership to low and moderate income people. This fits better with their political agenda rather than acknowledging that the main problem was greed and fraud perpetuated by major Wall Street banks (who were bailed out by taxpayers) and many lesser actors in the financial sector.

Andrew Ross Sorkin writes about the two "zombie giants":

In other words, the sinkhole that is Fannie and Freddie -- Freddie just said it needed an additional $1.8 billion and the Congressional Budget Office says the combined companies could cost taxpayers $389 billion over the next decade -- is not a function of those firms making new loans that have gone bad, but the continued "bleeding," as Mr. Frank put it, from previous loans made before the crisis that are still going belly-up.

More important, shutting down Fannie and Freddie and having the private market step in, as politically popular a sound-bite as that may be, is economically unfeasible. For better or worse, Fannie, Freddie and Ginnie Mae were behind 98 percent of all mortgages in this country so far this year, according to the Mortgage Service News. Pulling the rug out from under them would be pulling the rug from under the entire housing market as it continues to struggle.

Basically these two companies were nationalized and are currently part of the state or government. Yet people seem to dance around that fact in their terminology:

"I take offense at the idea that we’ve done nothing," he told me. Far from dragging its feet, he insisted, the government took the bold step of putting Fannie and Freddie into conservatorship in 2008. "There was no political fear to not do it"

...

One of the more interesting ideas being floated is that the government-sponsored enterprises, Fannie and Freddie, would subsidize loans only for low-income families by lowering the size of a so-called conforming loan. At the moment, Fannie and Freddie are buying up single-family mortgages for up to $417,000, and in some high-cost areas as much as $729,750, clearly benefiting families that don’t need the subsidy.

...

"Were the G.S.E.’s to cease buying mortgages or guaranteeing mortgage-backed securities, financing for buying homes today would be virtually nonexistent until the banks got back up on their feet. This would result in mortgage prices increasing, causing demand for housing to decrease, taking the value of homes even further down," Anthony Randazzo, director of economic research of the Reason Foundation, wrote in a letter to Mr. Geithner.

Reason shouldn't be quoted on anything. It was their free market ideology that caused the Great Clusterfuck. Have they come to terms with this? No.