Treasury Secretary Timothy Geithner told lawmakers that the White House will postpone Fannie Mae and Freddie Mac overhaul proposals until 2011, noting that distance is needed between the development of a new structure and the current housing crisis, according to a Feb. 25 Associated Press report. Geithner’s comments signal a change from his earlier desire for Congress to take immediate action on new Wall Street reforms.
Republican critics have argued that reforms should have been proposed in 2009, but Geithner said, “We want to make sure that we are proposing these changes at a time when we have a little bit more distance from the worst housing crisis in generations.”
Geithner added that Fannie and Freddie will not be included in the federal budget as an earlier proposal had indicated was a possibility. “That’s going to be a difficult set of reforms, but we do not believe it’s necessary to consolidate the full obligations of those entities onto the balance sheet of the federal government at this stage,’’ he said.
With House Financial Services Chair Barney Frank, D-Mass., planning hearings on Fannie and Freddie in the next couple of weeks, the future of the two entities may be determined sooner rather than later. Frank recommends dismantling the two mortgage giants in favor of creating an entirely new housing-finance system, according to a Feb. 23 report in The Wall Street Journal. Moreover, Federal Reserve Chair Ben Bernanke urged the committee to move quickly. “The sooner you get some clarity about where the ultimate objective is, the better,’’ Bernanke told the committee.
Meanwhile, the National Association of Realtors is calling on lawmakers to convert Fannie and Freddie into federally owned nonprofit corporations, the Journal reported. However, because it would largely leave the two entities intact, the proposal is expected to be met with resistance from critics who argue that the companies should be privatized.
NAR’s proposal adds to a growing consensus among some industry watchers that the government should continue to play an active role in the mortgage industry. “Despite their troubles, they created a lot of good … by making capital more liquid and by making mortgages more available,” Lucien Salvant, a NAR spokesperson, told the Journal.