President-elect Trump’s nominee for Treasury secretary, Steven Mnuchin, said on Wednesday that Fannie Mae and Freddie Mac should be “privatized.” This comment sent their share prices soaring, as investors speculated that the two firms will be allowed to recapitalize and return to the mortgage markets as the dominant players they once were.

This outcome is highly unlikely, as a little history shows, and that’s why Mr. Mnuchin’s comment was probably misinterpreted by investors.

As...