He is suggesting that if the GSEs do actually need a bailout, that the government should operate them for some period of years:

We need the GSEs to be highly active in support of the housing market and financial system in the months ahead. If authorities can see a path to their being able to play such a role in a framework where their borrowing is based on confidence in their financial position, rather than primarily on federal guarantees, then this is obviously the preferred alternative. But after what we have seen, such a judgment cannot be based on the GSEs’ own claims, the understandable desire of government officials to maintain confidence and attract private capital, or the fact that the GSEs are able to borrow — which only reflects the strength of federally provided credit assurances.

If this preferred alternative is, as I fear, not realistic given the state of GSE finances, the government should use its new receivership power to protect taxpayers and the financial system. In the process, payments to stockholders, holders of preferred stock and probably subordinated debtholders would be wiped out, conserving cash for the benefit of taxpayers. The GSEs’ borrowing costs would fall considerably, helping prospective homeowners.

In this scenario, the government would operate the GSEs as public corporations for several years. They would then be in a position to extend credit where appropriate to support resolution of the housing crisis. Once the crisis has passed, the federal government would divide their functions into government and private components, the latter of which would be sold off in multiple pieces. The proceeds could be used to fund the low-income housing support activity that was previously mandated to the GSEs.

It should be noted that Fannie Mae was a federal agency from the late 1930s to the late 1960s.