Fannie Mae Freddie Mac Likely To Live On Despite Government Criticism
Margaret Chadbourn, Reuters via Huffington Post
In considering how to fix the ailing U.S. housing market, Republicans and Democrats in Washington have found a rare point of agreement: they would prefer life without failed mortgage giants Fannie Mae and Freddie Mac.
But even with agreement that the system is broken, it is unlikely Congress will soon tackle the mammoth task of winding down two entities that have cost taxpayers more than $150 billion since their bailout in September 2008. Fannie and Freddie now support about 60 percent of all new U.S. home loans.
Already, lawmakers have taken tentative steps to scale back Fannie Mae and Freddie Mac’s involvement by reducing the size of loans that they can guarantee. Republicans and Democrats have unified behind preserving affordable homeownership.
But more dramatic actions could be politically treacherous in an election year. Home buyers still rely on the government backstop in nine of 10 new mortgages, and the fragile market must be weaned slowly from its dependence on federal programs providing financial backing.
Changing the present system might prove hard for lawmakers who are wary of risking harm to the housing recovery. Some would fear alienating the deep-pocketed housing lobby and various consumer groups rallying around the issue.
“There’s not a politician out there who is willing to take the risk of proposing something with a short transition period that would potentially be blamed for cratering the housing market,” said Douglas Elliott, a Brookings Institution fellow and former investment banker.
