12 Of The Best Power Tools To Buy If You’re Starting A Tool Collection







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It’s fair to say that power tools can be an intimidating topic to get into. Most brands have hundreds of power tools. It’s such a challenge to even pick a brand that there are whole guides written about the steps you should take to do it. It doesn’t help matters that you can likely walk into any hardware store, look at any power tool, and find a use for it at home. With so many options and so many uses, how do you decide which ones to buy first? 

Well, there is no handy guide for something like that, but we can come close. In most cases, you don’t need most of the hundreds of available power tools until you’re a professional or if you work with the same thing repeatedly. For example, you probably won’t ever need a pipe crimper since any problem large enough to require one is likely something you’ll want to call a plumber for, or even if you do tackle it yourself, you probably won’t be working with pipes often enough to justify the expense. 

As a homeowner with nearly a decade of experience, I’d like to help you get started with your power tool journey.

A power drill and an impact driver

The very first tool you should consider buying is the humble cordless drill. Of all the tools in my arsenal, the drill definitely gets the most use, and that’s even compared to my hand tools. Virtually every power tool brand on the market sells one of these, and for DIY home repair and improvement, you can pretty much choose any of them. They’re useful for literally any job that requires a screw or any job that requires you to make a hole somewhere. 

However, you may want to consider going one step further. Most major tool brands sell power drills with batteries and chargers along with an impact driver as a sort of beginner kit. It is generally more expensive than just buying a drill, but it’s also usually less than the cost of buying either tool separately with batteries for both. Impact drivers are similarly useful, allowing you to drill into more materials like concrete while also dealing with heavier-duty screws without stripping. 

If you could only buy one power tool today, there’s a good argument that it should be a drill and impact driver combo. It was my first power tool, and I still use it to this day.

A reciprocating saw

A reciprocating saw is another tool that’s usable for so many things, making it quite easy to justify having one. This is another tool that is sold by most major brands, and most of them do a pretty good job making them. The only thing you need to be careful of is that these tools are often called Sawzalls (because they saw all), but that is actually a trademarked name specifically for reciprocating saws made by Milwaukee. It’s kind of like referring to all facial tissues as Kleenex. 

These things can cut basically anything, including metal, plastic, and wood. The blades are interchangeable and replaceable, and different blades are designed to cut different things. They are also largely all universal in terms of fit, so you can buy something like this Milwaukee Sawzall blade set and use it on your reciprocating saw. With the proper blades in tow, you can tackle a variety of tasks that require you to cut something up quickly. 

I’ve used a reciprocating saw for a lot of things, from trimming my maple tree to cutting downspouts to fit on my gutters. You can even use these things to trim trees and bushes in your yard if you want to. 

Dremel 8250 or 4300

So far, you may have noticed that we haven’t recommended a specific brand for any of the tools, and we’ll discuss why that is later. For the Dremel, it is one of the exceptions to the rule. Technically, Dremels are called rotary tools, and they do as the name suggests. You put a bit on the end of it, and the tool rotates it very quickly. It’s useful for cutting, polishing, engraving, sanding, sharpening, and dozens of other tasks. 

For this, the Dremel 8250 is the best choice if you want to go cordless and the Dremel 4300 is the superior choice if you want a cord. The 4300 model is stronger, but the 8250 model is more convenient, so pick your poison. Both of them do the same thing and hold the same bits, so functionality is largely the same between the two. Both also come with some introductory bits, but Dremel sells a rather large rotary tool accessory kit that add a lot more. 

This is a tool that may not have a primary use like a drill, but you’ll figure out a reason to use it. When you’re not fixing or building things, it’s also quite popular in the crafts and hobbies segment. 

A circular saw

A few years back, my neighbor drove his truck into my yard and pulled down a 50-year-old shed with termite and mold damage. I was left with a pile of rubble in my yard that I needed to break down and dispose of. The tool I used most often for this task was the circular saw. These things are kind of like reciprocating saws in that they can cut loads of different materials but are made more for bigger tasks like disassembling a moldy, termite-damaged old shed. 

These tools can get pretty expensive, so you’ll want to make sure you have a solid use for them before going all in. You can find cheaper ones, but it largely depends on which brand’s ecosystem you decide to go with. In most cases, these are purchased as tools only but are compatible with each brand’s battery system. Thus, if you buy a DeWalt cordless drill, you’ll probably want a DeWalt cordless circular saw. 

This is also a reasonably good choice if you decided to go with a corded power tool. Corded versions are usually much cheaper and often stronger than their battery-powered counterparts. Just be careful not to cut the cable.

A shop vac

Not all power tools cut and drill, and often they are overlooked when building a collection. Enter the shop vac, which should definitely be in the first two or three power tools you buy. These little guys do exactly as the name suggests, which is vacuum things up, and they specialize in vacuuming things you probably don’t want to flow through the vacuum you use on your carpet in the house. 

Most power tools can be purchased cordless and will perform their jobs just fine. For the shop vac, I actually recommend getting one with cords. They’re larger and stronger at the same price that you would find a cordless one, and the extra power and space is well worth the hassle of an extension cord. These are widely available at every hardware store, and sold by many brands, each with their own quirks.

I use my shop vac several times a year. In one case, I had a sump pump that went bad, and I used my shop vac to empty it until a plumber could come and replace the sump. Just remember that the paper filter is for dry stuff and the foam filter is for wet stuff. 

An angle grinder

Angle grinders are another useful tool best used for cleaning things up. I borrow my neighbor’s angle grinder to sharpen my lawn mower blades every other year, and it’s also useful for grinding and polishing other metal items, sharpening other tools, and cutting things like stone, tile, and brick. That’s useful enough to find a consistent use for one. After all, everyone has to sharpen their mower blades sometime. 

Like most other power tools, nearly every major brand sells these at varying prices. The majority of the ones you’ll find in hardware stores feature 4.5-inch disks, and that’s both cordless and corded. The good news is that’s enough for anything a DIYer would need. Much like reciprocating saws, angle grinders have different discs that cut, polish, or grind different materials, so you’ll want to make sure to get the correct ones for your needs.

A big reason is due to safety. Angle grinders can be pretty dangerous if used incorrectly, as discs can break and shoot back at you if you’re not careful. You should always read the manual, but this is one of those tools where you definitely want to make sure to do so.

A heat gun

Heat guns are one of those tools that you can use a whole lot, but you may not think about it until you actually own one. These tools are pretty simple. They blast air hot enough to melt stuff, and so your only task with one is to find something you want to melt. They’re commonly used to loosen adhesives, strip paint, heat-shrink things like electrical connectors. It’s also useful for melting plastic enough to mold it and loosening old bolts and screws. It’s also popular in crafting, although you probably don’t want maximum temperature for that.

Cordless heat guns do exist from most major brands, but for this application, a corded heat gun is probably the way to go. You get more heat and more features at the same price. For example, this Milwaukee cordless heat gun goes up to 1,000 degrees Fahrenheit and costs $150. This Hercules corded heat gun can go up to 1,200 degrees, has 108 temperature settings, and six fan speeds for $55. We’re not saying you should just buy the Hercules one, but it is worth shopping around both corded and cordless models to see the differences in features and price.

A random orbital sander

If you’ve ever built something made out of wood, you probably could’ve used a random orbital sander. Its primary use is sanding, and unlike belt sanders, it sands in a circle instead of straight, which allows you to move it around and sand larger areas without damaging the wood. The random part refers to the machine using circular motions while spinning the sanding disc, which helps reduce swirl marks from non-random-orbital sanders. In short, if you have to buy one orbital sander, you should probably make it a random orbital sander.

These are available both corded and cordless, and you can choose whichever one you prefer. People have the debated the merits of both, but it basically boils down to whether or not you want more convenience without the cable or longer sessions with a cable since you don’t have to swap batteries. If you plan on replacing the bag on cordless sanders with a vacuum hose, that may also impact your decision making. 

Orbital sanders are best known for smoothing out wood and preparing it for finish, but you can also use them to strip paint and varnish, do some types of automotive work, and more. It’s worth having one around. 

An oscillating multi-tool

Oscillating multi-tools are a little bit like reciprocating saws in that they’re useful for so many things that the biggest limit is your imagination. As the name implies, oscillating multi-tools move the blade back and forth in a fixed arc that is fast enough to cut stuff with. These tend to be smaller tools, so they’re best used in scenarios where a reciprocating saw would be too big. Otherwise, the two of them are remarkably similar in the types of work they can do. 

These are available in both corded and cordless variants from most major brands. The best ones these days tend to be cordless, but you can pick your poison as you choose. They’re also relatively inexpensive, with many going for under $100, which puts it down into power drill territory with most brands. Like reciprocating saws, the type of blade matters as well, so you’ll want to make sure you have the right one for the job. Some blades cut wood and nails, and others are made to cut masonry and concrete. 

If you buy no other tools on the list besides a drill, the reciprocating saw and oscillating multi-tool cover so many uses that they’re next up on the list.

A power washer

A power washer is another power tool people don’t often think about when considering their collection It’s true that garden hoses are the superior choice when it comes to distributing water around your property, but when it comes to deep cleaning, a power washer is the way to go. You can clean your driveway and sidewalk and, provided you pay attention to your PSI, you can even clean your house, patio, patio furniture, grill, and other items that you commonly keep outdoors. 

Electric cordless power washers do exist, but they pale in comparison to corded electric ones. Most major brands sell them, and the differences appear to be minimal, so you can choose the one you want. There are gas options as well, and they work just as well. The determining factor is the PSI level, which ranges from 300 PSI all the way up to over 4,000 PSI on residential units, and even higher on professional ones. Pick one too weak, and it won’t clean anything; pick one too strong, and you’ll blow the siding off your house.

Generally speaking, around 3,000 PSI seems to be the sweet spot, and then it’s just a matter of choosing the correct power washer nozzle for the job.

A nail gun

Nail guns are a unique tool. Many of these are still pneumatic, which means they’re powered by air pressure instead of electricity, but you can find some corded and cordless versions that use electricity. You can choose whichever one you like most, but for this list, the pneumatic ones probably aren’t the best option since you need a compressed air setup capable of running tools. If you go down that rabbit hole, you may as well invest in air tools instead of power tools. 

In any case, nail guns are great when you need to use a lot of nails, generally in DIY home improvement projects. It’ll save your arm and shoulder a ton of work, and you’ll get done with what is normally a fairly tedious task with a hammer much faster. However, people often don’t need to nail things that often, so a nice alternative is something like this DeWalt 5-in-1 Multi-Tacker and Nailer. It’s a corded tool that shoots nails, staples, and other things, which may get more frequent use than just a nail gun. 

You can probably make do with just a hammer, but if you ever do a project that requires a lot of nailing, you’ll be glad you have a nail gun. 

A jigsaw

Of all the tools on the list, the jigsaw is arguably the most optional, but if you can find some solid uses for it, it’s worth keeping around. Every other cutting tool on this list focuses on cutting in a straight line for the most part. Jigsaws are unique because they can cut in curves, giving you an option you can’t easily get with the other saws on the list. It’s mostly used to cut things to shape for whatever project you’re working on, but you’ll need this if you’re ever building furniture, cabinets, or trim pieces. It’s also useful for drywall, metal, and plastic applications, provided you have the correct blade. 

Jigsaws are widely available from the major brands, and most of them are pretty good. They can be a bit on the pricier side for a handheld tool, even when purchased without a battery, but cheaper options do exist depending on which power tool brand you go with. There are corded and cordless variants available, so follow your heart when making that choice. 

Just be sure to research what kind of blade you need before your project. Using the wrong blade can break the blade, your material, or both. 

How we selected these power tools

The idea behind this article is to give a beginner some perspective about what tools they can buy and which ones they should skip or leave for later. The tools above cover the most possible bases across most of the things you’ll run into when DIY repairing or improving a home, with the exception of plumbing, which a beginner shouldn’t do anyway. Some of the tools above are quite obvious, like the drill and the reciprocating saw, while others are things people may not consider, like a shop vac or a power washer. 

The point of the list is specifically which tools, and not necessarily which brand. The reason is because if you buy cordless tools, you basically have to pick your ecosystem with your first purchase, and so if we recommended a DeWalt cordless drill, we would’ve had to recommend all DeWalt tools, otherwise someone may have ended up with 12 different batteries for 12 different tools, which is not optimal. If you want to see which brands make the best tools, we have a separate list for that

This list is also based on my near decade of experience as a homeowner and DIY enthusiast, and the tools on this list are the ones I’ve used most often, whether corded or cordless.





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On Friday, Bill Pulte (Director of the Federal Housing Finance Agency and chairman of both Fannie Mae and Freddie Mac) announced that America’s two government sponsored housing finance giants are exploring equity stakes in technology companies.

Speaking at the ResiDay conference in New York, Pulte described potential partnerships where tech firms would offer Fannie and Freddie equity positions, explicitly citing the Trump administration’s recent investment in Intel as a model.

I’m reminded of the American baseball legend Yogi Berra’s famous quip: “It’s like déjà vu all over again.”

What we’re witnessing here is the American government (through Fannie Mae and Freddie Mac, state owned mortgage institutions) once again heading down a path that bears a disturbing resemblance to the past.

The 2008 playbook

Leading up to the 2008 financial crisis, Fannie and Freddie played a central, though unfortunate, role.

These two institutions were designed to make home loans cheaper and more accessible by purchasing loans from banks and reselling them as securities to investors.

However, to keep pace with private competitors, they began taking on increasingly risky mortgages.

When housing prices fell, the losses were enormous, and in 2008 the American government had to take control to prevent a total collapse in the housing and financial sectors.

And now we see Bill Pulte (Trump’s handpicked chief of the powerful regulatory body, the Federal Housing Finance Agency) openly discussing how these state backed mortgage institutions should invest money in American technology companies.

Pulte stated that he views Fannie and Freddie somewhat differently because they operate as actual businesses, albeit private ones. He indicated that the GSEs will likely take ownership stakes in various companies as those firms offer equity in exchange for business partnerships with Fannie and Freddie.

More tellingly, Pulte acknowledged the coercive nature of these arrangements, explaining that major technology and public companies are offering equity to Fannie and Freddie in exchange for business partnerships. He noted that the GSEs are considering taking these equity stakes because of the substantial power Fannie and Freddie wield over the entire housing finance ecosystem.

Crony capitalism comes to Silicon Valley

I must be frank: this is beginning to stink.

Over the past week, we’ve received a series of signals that the American government now intends to directly support American technology companies through precisely the kind of arrangements that characterise crony capitalism, where political connections and government favour, rather than market competition, determine winners and losers.

On Monday, the Wall Street Journal reported that OpenAI’s CFO, Sarah Friar, hinted that government guarantees could cut AI funding costs – later backtracking to say they weren’t seeking a bailout. But the message was clear: tech giants now assume taxpayer backing, just like banks did before 2008.

So if you’re asking yourself why American tech giants (particularly the so-called “Magnificent Seven”) are trading at the extraordinary valuations we see today, you likely have part of the explanation here: investors aren’t just pricing in technological progress or profit growth. They’re pricing in implicit government guarantees.

They’re pricing in the expectation that the Trump administration will support these companies, that losses will be socialised whilst gains remain private, that these firms have effectively become “too big to fail.”

This is moral hazard on a grand scale, but now applied to an entire sector rather than just individual institutions. The market isn’t valuing these companies based on discounted future cash flows. It’s valuing them based on the anticipated probability of state intervention to prevent failure.

And the connections between political donations and government favour are becoming impossible to ignore.

Elon Musk, who contributed hundreds of millions of dollars to Trump’s campaign (making him the largest individual political donor in the 2024 election cycle), now wields extraordinary influence over government policy.

Marc Andreessen and Ben Horowitz, whose venture capital firm has invested heavily in OpenAI, together donated over $5 million to Trump aligned political action committees.

Peter Thiel, the co-founder of Palantir, spent $15 million to elect JD Vance to the Senate in 2022. Vance is now vice president.

These aren’t coincidences. They’re investments with expected returns.

But to my mind, this is also a very clear signal that shouldn’t be ignored: all is not as it should be with the tech giants. Over the past few weeks, we’ve seen turbulence surrounding share prices in the sector, but perhaps more worryingly, also rising tensions in credit and money markets.

It’s simply about nervousness that some AI companies potentially face liquidity problems, and ultimately whether this might infect the banking sector.

The market is already showing cracks

And these aren’t just theoretical concerns. Over the past fortnight, we’ve seen concrete signs of stress in American credit and money markets.

The Federal Reserve has been forced to inject substantial liquidity into the system to prevent tensions in the repo market from escalating.

On 31 October, the Fed injected $50.35 billion into the system (the largest single day operation since 2021), followed by an additional $22 billion on 3 November.

The Secured Overnight Financing Rate has shown unusual volatility, with repo rates spiking to their highest levels relative to the Fed funds rate since 2020, precisely the kind of pressure that typically precedes broader credit events.

Major Wall Street banks, including JPMorgan and Deutsche Bank, have warned that money market stress could flare up again.

Dallas Fed President Lorie Logan has suggested the central bank might need to begin purchasing assets if the rise in rates proves more than temporary, echoing the kind of emergency measures deployed during previous crises.

More tellingly, major international banks are taking defensive positions. Deutsche Bank, which has extended billions in loans to data centre firms powering the AI boom, is now reportedly exploring hedging strategies including shorting baskets of AI related stocks and purchasing credit protection to offset potential losses if the current pricing regime collapses.

When one of Europe’s largest banks starts hedging against its own AI lending book, that tells you something important about where sophisticated risk managers think we are in the cycle.

JPMorgan’s Jamie Dimon warned in October about a probable market decline of 10 to 20% within the next 6 to 24 months, citing concerns about overheating in the technology sector that could trigger a correction similar to the dotcom crash of 2000.

Goldman Sachs’ David Solomon echoed these concerns this week, stating that a 10 to 20% drawdown in equity markets within two years appears likely due to AI related risks and trade tensions.

Even the Bank of England’s Andrew Bailey has warned of “growing risk of a sharp correction” if AI expectations falter, with “alarm bells ringing” over private credit and AI concentration in major indices.

Regional American banks have already begun reporting losses on loans to distressed investment funds, and credit default swap spreads on major banks have risen to elevated levels.

And I’m hardly the only one concerned. I’m completely convinced that credit and risk management departments in all the major global banks are worried about precisely this right now. The parallels to 2007 (when credit markets began showing stress months before the broader crisis became apparent) are uncomfortably clear.

The Intel precedent: when subsidies become equity

To understand what Pulte is proposing, we must first examine the model he explicitly referenced.

In August 2025, the Trump administration took a 9.9% equity stake in Intel Corporation worth $8.9 billion, converting previously awarded CHIPS Act grants and Defence Department funds into common stock ownership. The government purchased 433.3 million shares at $20.47 per share.

Commerce Secretary Howard Lutnick justified this approach by arguing that the government should receive equity stakes in exchange for the funding that had already been committed under the previous administration.

But Intel was only the beginning.

The Trump administration has also taken equity stakes in MP Materials (rare earth mining, 15%), Lithium Americas (lithium production, 5-10%), and Trilogy Metals (copper zinc mining, 10%). Reports emerged in October that the administration was exploring similar arrangements with quantum computing firms including IonQ, Rigetti Computing, and D-Wave Quantum, though the Commerce Department subsequently denied “currently negotiating” such stakes (language that leaves ample room for future deals).

This represents an extraordinary shift in American economic policy and a troubling embrace of what can only be described as crony capitalism.

Unlike previous government equity stakes during financial crises (TARP in 2008 or airline support during COVID-19), the Trump administration has taken these positions without any financial emergency.

The ideological precedent is clear: converting government grants and subsidies into equity ownership across strategically important industries, creating an intertwined relationship between state power and private profit that undermines market discipline.

Now Pulte wants to extend this model to Fannie and Freddie. According to Pulte’s statements from May, Fannie Mae has approximately $4.3 trillion on its balance sheet, whilst Freddie Mac holds over $3 trillion.

The scale of what’s at stake

Fannie Mae and Freddie Mac don’t just participate in America’s housing market; they effectively are the housing market. They guarantee roughly half of all outstanding U.S. residential mortgages (the largest share of the approximately 70% of American home loans that receive some form of federal backing, including FHA, VA, and other programmes).

When institutions of this size and systemic importance start deviating from their core mission, the consequences ripple through the entire financial system.

My friend and Richmond Fed veteran economist Bob Hetzel wrote in his seminal 2009 analysis of the financial crisis about how financial safety nets inevitably create moral hazard by increasing incentives for risk-taking.

The critical mechanism he identified: financial institutions receive implicit subsidies from safety nets that grow larger as their portfolios become riskier, as they increase leverage, and as their capital buffers decline.

2008: when mission drift became catastrophic

The last time Fannie and Freddie strayed from their mandate, it ended catastrophically. In September 2008, both institutions collapsed under the weight of massive losses and required a government takeover that has lasted 17 years. At the time of conservatorship, they held or guaranteed about $5.2 trillion of home mortgage debt.

The scale of the losses was staggering. About 80% of Fannie and Freddie’s combined $213 billion in credit losses between 2008 and 2011 involved mortgages that were either Alt-A, interest only, or both. These were loans made to borrowers with relatively high credit scores but featuring riskier structural characteristics. The critical error wasn’t the specific loan types. It was the strategic decision to chase market share by expanding into riskier segments well outside their traditional remit.

Starting in 2006 and 2007, just as the housing market reached its peak, Fannie and Freddie increased their leverage and began investing heavily in subprime securities and Alt-A loans in an ill-fated effort to win back market share from private competitors. This is textbook mission drift: institutions designed for one purpose (providing liquidity to mortgage markets) taking on unrelated risks with predictably disastrous results.

Hetzel understood the fundamental problem.

Writing specifically about the GSEs, he noted that understanding the subprime crisis required grasping how Fannie and Freddie had increased demand for housing stock, pushed homeownership rates to unsustainable levels, and thereby contributed to sharp rises in housing prices given the relatively inelastic supply of housing due to land constraints.

Perhaps most damningly, Treasury Secretary Timothy Geithner told the Financial Crisis Inquiry Commission in a private interview that moral hazard was pervasive throughout the system, with the GSEs representing the single largest source of this problem.

The new mission drift: from mortgages to tech equity

Now we’re watching a remarkably similar pattern emerge, only this time the target isn’t housing. It’s technology.

Pulte indicated at the conference that “one of many companies” seeking equity arrangements with Fannie and Freddie is a firm whose involvement would leave observers “blown away with how much money is involved,” though he declined to name it.

Fannie Mae has already signed a partnership agreement with Palantir for fraud detection efforts, though financial terms weren’t disclosed (precisely the kind of opacity that should alarm anyone concerned with accountability).

The Palantir connection is particularly revealing. Since Trump took office, Palantir has secured large federal government contracts. Peter Thiel, Palantir’s co-founder, spent $15 million electing JD Vance to the Senate.

Vance is now vice president. Joe Lonsdale, another Palantir co-founder, contributed $1 million to Elon Musk’s America PAC supporting Trump. This isn’t a market economy. This is a system where government contracts and partnerships flow to companies whose founders financed the campaigns of those now in power.

The proposed model is seductive in its simplicity: tech companies offer Fannie and Freddie equity stakes in exchange for access to the GSEs’ enormous housing finance ecosystem.

But consider Pulte’s own reasoning: the GSEs are considering taking equity stakes in companies specifically because of the substantial power Fannie and Freddie exercise over the entire ecosystem.

This isn’t market allocation. This is using control over critical infrastructure to extract equity positions from private companies. This is crony capitalism at its most transparent.

Moral hazard at scale: the implicit guarantee premium

The fundamental problem here isn’t just about Fannie and Freddie taking equity stakes in a few tech companies.

It’s about what those stakes signal to the broader market about the existence and scope of implicit government guarantees.

Hetzel identified the core mechanism with precision: financial safety nets (including deposit insurance, too-big-to-fail protections, Federal Home Loan Banks, and the Fed’s discount window) allow banks to access funding at costs that don’t rise with the riskiness of their portfolios.

The same logic applies when government backed entities like Fannie and Freddie take equity positions in private companies.

That government guarantee (now explicit after 17 years of conservatorship) means US taxpayers ultimately backstop losses whilst any gains accrue to whom exactly? The Treasury? Tech companies?

This creates a fiscal time bomb where downside risk is socialised whilst upside is privatised.

But the effects extend far beyond the specific companies receiving these investments.

When the market observes the government taking equity stakes in Intel, exploring partnerships with OpenAI, and now planning to inject Fannie and Freddie capital into technology firms, investors rationally update their beliefs about which companies enjoy implicit state backing.

The extraordinary valuations we observe across the Magnificent Seven and related AI companies aren’t just about technological optimism. They reflect the market pricing in an implicit guarantee that these firms are “too big to fail.”

This is moral hazard pricing on a sectoral scale. And it raises a troubling question: if these companies are indeed “too big to fail,” are they also becoming “too big to save”?

Too big to fail or too big to save?

Consider the arithmetic. The combined market capitalisation of the Magnificent Seven alone now exceeds $20 trillion. Add in the broader ecosystem of AI related companies, data centre operators, and semiconductor firms, and you’re looking at market value that’s at least partially predicated on the assumption of government support.

Now place that against America’s fiscal position. U.S. national debt stands at $38 trillion (more than 100% of GDP). Interest payments reached $841 billion in just the first ten months of fiscal year 2025, already exceeding Medicaid.

The Congressional Budget Office projects debt will reach 156% of GDP by 2055, with interest payments hitting $1.8 trillion annually by 2035.

Here’s the uncomfortable arithmetic: when the next crisis comes (and it will come), can the American government actually afford to bail out a technology sector whose market capitalisation approaches half the entire national debt? The fiscal buffer that existed in 2007, problematic as it was, has completely evaporated. We may be creating a class of companies that markets believe are too big to fail, but which the American government is quite possibly too indebted to save.

And this is before considering the international dimension.

When Fannie and Freddie (institutions with explicit government backing) take equity positions in tech companies, it sends a signal to foreign holders of U.S. Treasury securities that America is extending its contingent liabilities even further into speculative territory.

For a Chinese central bank holding a trillion dollars in Treasuries, or a Japanese or Scandinavian pension fund with massive exposure to American debt, this doesn’t look like prudent fiscal management.

It looks like the American government is systematically increasing the risk that it will face multiple, simultaneous calls on its financial resources that it cannot meet without inflating away its debts or defaulting.

The conservatorship paradox and regulatory capture

Pulte confirmed on Friday that Fannie and Freddie will remain in government conservatorship whilst potentially conducting an IPO of up to 5% of their shares this quarter or early next year.

He indicated that he anticipates the president will make a decision on the IPO timing either this quarter or in early 2026.

Think carefully about what this means: these institutions remain under explicit government control because they’re deemed too important and too risky to operate independently in housing markets, yet they’re simultaneously being encouraged to speculate in technology equity markets.

The conflicts of interest are staggering. Pulte runs the agency that regulates Fannie and Freddie whilst simultaneously chairing both companies.

If those companies become equity investors in major tech firms, he’ll effectively be regulating entities in which his institutions have direct financial stakes.

This is regulatory capture taken to its logical extreme: the regulator, the regulated entities, and the companies receiving investment all bound together in a web of mutual dependency that eliminates any possibility of arms length oversight or genuine market discipline.

If Fannie and Freddie aren’t trustworthy enough to exit conservatorship after 17 years of profitability in their core business, what possible justification exists for expanding their mandate into tech investment?

What should happen instead

The solution is straightforward but politically difficult: complete the mission Fannie and Freddie were designed for, then either privatise them fully or wind them down entirely.

If conservatorship is necessary because these institutions require close government supervision, keep them focused exclusively on their housing mandate with strict limits on portfolio composition and leverage.

If they’re healthy enough to take tech equity positions, they’re healthy enough to exit conservatorship and face genuine market discipline.

What should not be accepted is this worst of all worlds hybrid: government guaranteed institutions with neither proper oversight nor proper market discipline, now venturing into speculative investments far beyond their expertise or mandate, at a time when the U.S. government’s own fiscal position is already unsustainable, all whilst creating a sectoral moral hazard problem that may prove impossible to resolve when the inevitable repricing occurs.

Hetzel proposed a radical but coherent alternative: eliminating the Fed’s legal authority to make discount window loans, suggesting instead that the central bank should flood markets with liquidity during panics through open market operations whilst maintaining its policy rate through interest on reserves.

The core principle: creditors and debtors will restrain financial system risk-taking only if they face genuine losses when financial institutions fail.

Every expansion of the safety net (whether through TBTF, discount window lending, government equity stakes in strategic companies, or now equity investments linking government backed housing finance to private tech firms) undermines this crucial disciplining mechanism.

Every implicit guarantee extended, every equity stake taken, every suggestion that politically connected companies will receive state support, moves us further from a market economy and deeper into crony capitalism where success depends not on serving customers but on securing government favour.

Conclusion: echoes from 2008

Seventeen years after Fannie and Freddie’s collapse nearly took down the global financial system, the same structural errors are being repeated, but this time with different assets, weaker fiscal foundations, and potentially far graver consequences.

The 2008 crisis taught us that Fannie and Freddie represent “entirely moral hazard” when they deviate from their core mission, as Geithner observed. Fannie and Freddie needed a $191 billion taxpayer bailout because they deviated from their core mission, driven by the same toxic combination of implicit government guarantees, inadequate oversight, and mission drift that is re-emerging today.

Now, under political pressure to “do something” about housing affordability and tech competitiveness, they’re being pushed down the same path again, only this time explicitly following the Trump administration’s model of crony capitalist equity stakes, at a time when U.S. federal debt stands at 100% of GDP, interest payments exceed defence spending, and the fiscal buffer to absorb another systemic crisis no longer exists.

But this time there’s an additional, more troubling dimension. This isn’t just recreating the moral hazard of 2008. This is creating it at sectoral scale across technology companies whose combined market capitalisation may literally be too large for the American government to backstop.

The stress in credit markets, the Federal Reserve’s emergency liquidity injections totalling over $70 billion in early November, the defensive hedging by major banks like Deutsche, the warnings from JPMorgan, Goldman Sachs, and the Bank of England—these aren’t abstract concerns. They’re happening right now, and they’re happening for a reason.

The market is beginning to ask the question that should terrify policymakers: what happens when companies that everyone believes are too big to fail turn out to be too big to save?

The next crisis won’t announce itself with sirens and flashing lights. It will begin, as the last one did, with seemingly reasonable people making seemingly reasonable arguments about expanding mandates, capturing growth opportunities, and using “power over the whole ecosystem” for strategic purposes. It will involve the gradual extension of implicit guarantees until the market prices them in as explicit. And this time it will happen in a context where U.S. federal debt is at historically high levels, the fiscal capacity to absorb losses has evaporated, and the companies that need saving may be orders of magnitude too large for the government’s balance sheet.

The lesson from Washington in 2008 was clear. Apparently, it needs to be learned once more, and this time, the tuition fees may be higher than ever, both for the financial system and for U.S. sovereign creditworthiness itself.

The only question is whether this administration is creating companies that are too big to fail, or too big to save.

I fear the answer will reveal itself soon enough.


Lars Christensen
LC@paice.io
+45 52 50 25 06





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