Your endorsement of the Obama administration’s claimed authority to seize Fannie Mae and Freddie Mac ’s profits in perpetuity—even after taxpayers have been repaid—ignores the fact that the scheme eviscerates the government’s contractual obligations with shareholders (“Godzilla Defeats the Thing,” Review & Outlook, Oct. 2). Shareholder rights are not diminished when a firm derives benefit from government policy.

Yes, Fannie and Freddie have received massive government subsidies that tilt the playing field in their favor. But the answer, as the Competitive Enterprise Institute has argued for years, is to end those subsidies and other government perks, not run roughshod over property rights and investor contracts.

If the government is allowed to buy a majority of shares in Fannie and Freddie and then siphon all the firms’ profits to itself, what is to keep it from doing the same with other firms it deems systemically important, or that heavily depend on government, like defense contractors?

Taxpayers don’t “beat Godzilla” when government confiscations scare private investors out of the housing market. Instead, calls for pouring more public money into the housing sector only get louder.

John Berlau

Competitive Enterprise Institute

Washington

Begging your pardon, but I would kindly ask the Journal to refrain from referring to our Midwest insurance company, hundreds of community banks and thousands of retiree shareholders as “the Thing.” To be clear, “the Thing” provided the first multibillion-dollar bailout to Fannie Mae and Freddie Mac in May 2008 while the government twiddled its thumbs. In our investment committees, we also generally avoid usage of the phrase “killing on the upside” when referring to return of principal and interest.

The real private subsidy-seekers are the millions of Americans who have historically benefited from abnormally low mortgage rates bestowed by Fannie and Freddie’s implicit government guarantee. They are not out of the picture, as taxpayers will remain as implicit or explicit guarantors on whatever future entity replaces the GSEs. Any successor government mortgagor will be subject to the same political pressure as Fannie and Freddie as well.

Ironically, Judge Royce Lamberth denied the claim that Fannie and Freddie are in de facto liquidation, because they remain solvent even after the government’s dividend sweep. However, the original Federal Housing Finance Agency guidelines state, “Upon the Director’s determination that the Conservator’s plan to restore the company to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship.” So therefore if the entity can afford to pay out $180 billion and remain solvent in the eyes of the law, why hasn’t the director acknowledged the same fact?

Troy Peterson, CFA

Americo Life

Kansas City, Mo.

By act of Congress, Fannie and Freddie are public-private companies, so shareholders have an inherent basic fiduciary protection with the conservators oversight. The 2008 law is flawed. If Uncle Sam wants complete control of Fan and Fred, he should buy out existing shareholders. Until then shareholders are entitled to dividends and the free and open market.

B.J. Khalifah

Grosse Pointe Park, Mich.