The Trump administration is resurrecting a dangerous playbook for housing giants Fannie Mae and Freddie Mac, according to former FDIC chair Sheila Bair. The Federal Housing Finance Agency has directed these government-sponsored enterprises to dramatically expand their mortgage-backed securities purchases, reversing post-2008 reforms.

This approach mirrors the risky business model that contributed to the 2008 financial crisis. The GSEs are increasing their retained portfolios by $90 billion in 2025 alone, with plans to buy an additional $200 billion in mortgage securities. This brings their total holdings to $450 billion, triple their size at the start of the year.

The strategy aims to lower mortgage rates but risks recreating the housing bubble dynamics that preceded the last crisis. With capital levels still below regulatory minimums, the GSEs have limited capacity to absorb potential losses. The administration's push comes despite evidence that the $450 billion portfolio represents only 4% of total outstanding mortgage-backed securities and will have minimal impact on rates.