Republicans in the U.S. House of Representatives on Friday recommended the country's top two mortgage finance companies, the recipients of a massive government bailout during the height of the financial crisis, be phased out in four years in order to restore stability to the housing market.
The House Republicans offered five goals to guide the overhaul of Fannie Mae (FNM.N) and Freddie Mac (FRE.N), which were chartered by Congress with a mandate to provide liquidity to the U.S. housing market but are privately held by shareholders. The goals include reestablishing a housing finance market in which private capital is the primary source of mortgage financing.
The lawmakers put forward 10 principles, among them winding down Fannie Mae and Freddie Mac and cutting their mortgage portfolio holdings by 25 percent a year over four years.
"It is time to deal with bailed-out companies, which were at the center of the mortgage market meltdown that caused the financial crisis and have cost taxpayers hundreds of billions of dollars," said Representative Spencer Bachus, an Alabama Republican, and ranking member of the House Financial Services Committee.
The committee, chaired by Representative Barney Frank, a Massachusetts Democrat, is to hold a hearing on the future of housing finance on Tuesday.
In an interview on CNBC on Friday, Frank said the mortgage finance firms needed restructuring because the partially public, partially private "hybrid" was not workable.
"We made a mistake -- not me, I wasn't there when it was enacted but we helped perpetuate it -- setting up Fannie Mae and Freddie Mac as hybrids," he said.
"They were private shareholder corporations with a need to make a profit but they were also given this public mandate. That worked well when everything was doing fine, but when things got bad it wasn't working well," Frank added.
U.S. Treasury Secretary Timothy Geithner will testify and is expected to offer broad thoughts on how the role of Fannie Mae and Freddie Mac should change....MORE
Tuesday's hearing agenda:
Housing Finance-What Should the New System Be Able to Do?: Part I-Government and Stakeholder Perspectives
10:00 a.m., Tuesday, March 23, 2010, 2128 Rayburn House Office Building
Witness List & Prepared Testimony:
Available Member Statements:
Related Documents:Panel One: