What's to be done with Fannie and Freddie?

The Wall Street Journal reports that economists are divided on what to do about Fannie Mae and Freddie Mac:  nationalize them, or privatise them?  One thing that doesn't seem to be in question is that we should do one or the other; as it is they are neither fish nor fowl nor good red herring.

My preference is for privatisation, probably with a breakup first.  The deepening of credit markets over the last thirty years has made their role less than vital, while their government guarantee has dangerously concentrated mortgage risk.

This article available online at:

http://www.theatlantic.com/business/archive/2008/08/what-apos-s-to-be-done-with-fannie-and-freddie/3975/