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In addition, the assumption that U.S. taxpayers would stand behind Fannie and Freddie's bonds allowed them to get by with far less capital than their private market competitors (less than 1% capital to assets versus the market standard of 6% to 8%).

Fannie and Freddie successfully fought back, arguing that they pass on to borrowers most of the savings from their below-market-rate prices for capital. But that is debatable. Most economists believe borrowers get at most 10 basis points of Fannie and Freddie's built-in market advantage of 25 to 40 basis points.

That credit, if set to equal 10 basis points of the total mortgage rate, would be worth $400 a year on a $400,000 loan, about equal to what Fannie and Freddie provide indirectly to homeowners, and with considerably less noise and risk.

Don't hide a housing subsidy by outsourcing government policy to a semi-private, for-profit corporation that exposes the taxpayers to $5 trillion in potential liabilities.