How to get the US government out of mortgage lending

ONE OF the least-discussed challenges of the incoming Trump administration may also be among the most economically consequential: What to do with Fannie Mae and Freddie Mac, the government-controlled entities that own or guarantee about half of all US home mortgages.

President-elect Donald Trump's pick for Treasury Secretary, Steven Mnuchin, has said that he wants to put housing finance back into private hands. Sensible as the goal may be, the hard part will be getting there.

Fannie and Freddie illustrate how slippery the term "private" can be. The two operated as privately owned corporations for decades, albeit with a congressional mandate to promote access to mortgage credit. They generated ample profits for shareholders and gained a dominant position thanks in large part to the expectation that the government would rescue them in an emergency. That perception proved correct in 2008, and they have been wards of …