U.S. mortgage finance giants Fannie Mae and Freddie Mac, two symbols of the recent mortgage crisis, may be nearing their end.
Those firms may be shut down or sold off in 2011 or 2012 if the Republican-controlled House of Representatives gets its way, predicted Larry McDonald, former Lehman executive, during a visit to Australia, according to media reports.
A number of Republicans, including Rep. Scott Garrett, R-N.J., fear that Fannie Mae and Freddie Mac would cost the U.S. taxpayer at least another $73 billion to prop up, bringing their total bailout funding to $215 billion.
“Almost everyone agrees we’re going to do away with Fannie and Freddie. … The issue becomes, what do you replace it with?” said Steve Bartlett, president and CEO of The Financial Services Roundtable, according to Dallas News.
The federal government’s willingness to throw more and more taxpayer funds into those two firms’ coffers is on the minds of many experts. They suggest that this has grown into an untenable position and can’t be sustained in the long run.
“And yet, the federal government continues to prop them up with one blank check after another. No matter what the final cost, the bailout of Fannie and Freddie will be by far the most expensive component of the federal government’s intervention into the financial system,” said Garrett in an October statement.
Fannie, Freddie Critics
Garrett accused the two mammoth mortgage companies of being the major cause of the financial crisis. He proposed that the two companies be overhauled, but did not say outright that the companies should cease to exist, privatize, or reduce in size.
Lawmakers have addressed the Fannie Mae and Freddie Mac issue in opening statements at subcommittee meetings and in press releases, but few ideas have surfaced regarding their replacement.
“Fannie and Freddie have not been reformed. They are being used essentially as experimental guinea pigs for the administration’s home modifications programs,” Garrett said in an opening statement during a September House Financial Services Capital Markets, Insurance, and Government Sponsored Enterprises Subcommittee meeting.
Rep. Jeb Hensarling, R-Texas, also wants to end all corporate bailouts and see Fannie Mae and Freddie Mac put on the block.
Hensarling is the author of the sole bill in Congress (H.R. 4889) that calls for stopping any further bailout of the two mortgage companies and for both companies to close. So far, there are 21 co-sponsors, all Republicans.
The bill’s summary states that it sets up “a deadline and procedures for the wind down of operations and dissolution of an enterprise.”
At this time, the bill is stuck in the House Committee on Financial Services and any action does not appear to be forthcoming.
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