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The US mortgage market was the epicentre of the earthquake that shook the financial world a decade ago, and remains the largest area of unfinished business from the crisis.

The US government’s response to the meltdown amounted to a takeover of the market.

Fannie Mae and Freddie Mac, government-sponsored enterprises which had historically guaranteed about half of all new mortgages, were brought under a tightly-controlled federal “conservatorship” and propped up with $188bn of taxpayer funds. That allowed them to continue supporting the market when private investors — who had been voraciously buying securities linked to subprime mortgages before the crisis — disappeared and banks pulled back from lending.

The government has also extended programmes backing mortgages for low-income families and military veterans, and these together still outweigh the renewed private sector lending.

Deciding what to do with Fannie and Freddie, meanwhile, is a question on the political backburner. The agencies have been sharing some of the risk on new mortgages with the private sector, but having returned to profitability, they are handing billions to the US Treasury, and demands from some investors that they be privatised have fallen on deaf ears.

What should be done with Fannie Mae and Freddie Mac? Share your thoughts in the comments below.

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