The author is a Reuters Breakingviews columnist. The opinions expressed are his / her own.

By Gabriel Rubin

WASHINGTON, June 4 (Reuters Breakingviews) - There’s fresh talk about releasing the biggest financial rescues in U.S. history back into the wild. President Donald Trump last week hinted at accelerating efforts to reprivatize mortgage buyers Fannie Mae and Freddie Mac while also saying an implicit federal backstop would be left in place, which in effect suggests it's explicit. If there’s even less doubt that any losses will be socialized, then taxpayers deserve to retain a chunky share of the benefits.

Uncle Sam took control of Fannie and Freddie, the companies designed to keep the U.S. home-loan market churning, during the financial crisis in 2008. Last year, the duo provided almost $800 billion of funding that enabled the purchase of about 3 million residences. From buying, bundling and reselling mortgages to investors, they have together paid some $300 billion of dividends into the U.S. Treasury over the past 16 years.

Hedge funds, including most vocally Bill Ackman’s Pershing Square Capital, would understandably love to get their hands on those payouts. Releasing Fannie and Freddie from conservatorship will be fiendishly complex, however. Without a government backstop, for example, mortgages would get pricier and threaten home values. Cutting off U.S. support would increase the risk premium for such borrowing by 45 basis points, Goldman Sachs analysts estimate.

Although the massive bailout indicated that Fannie and Freddie are too big to fail, Trump is saying the quiet part out loud. Before proceeding with any initial public offering to hoist shares of the mortgage titans back onto a major bourse from trading over the counter, there are some big tabs to settle. The two companies are short of approximately $160 billion in regulatory capital, according to the Congressional Budget Office. To buy out preferred shares held by taxpayers would cost another $300 billion.

Moreover, to help cover an increasingly clear-cut government guarantee probably warrants a substantial mortgage insurance fee. And for Treasury to forgo too much of its senior position in the capital structure would be financially foolish and politically fraught. There’s some sense in returning Fannie and Freddie to private owners, but only if they’re kept on a tight financial leash.

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CONTEXT NEWS

President Donald Trump said on May 27 that the U.S. government would retain its mortgage guarantees and oversight role for federally sponsored mortgage enterprises Fannie Mae and Freddie Mac if they are spun out of conservatorship.

(Editing by Jeffrey Goldfarb; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on RUBIN/gabriel.rubin@thomsonreuters.com))