Fannie and Freddie May Not Survive Overhaul

Fannie and Freddie May Not Survive Overhaul

A top Treasury official will announce Wednesday that mortgage giants Fannie Mae and Freddie Mac won’t survive a revamp of the U.S. housing finance system in their current form.

"Private gains will no longer be subsidized by public losses, capital and underwriting standards will be appropriate, consumer protection will be strengthened and excessive risk-taking will be restrained," said Michael Barr, Treasury assistant secretary for financial institutions, in prepared testimony.

Barr is to deliver this news to the House Financial Service Subcommittee on Capital Markets on Wednesday.

Meanwhile, Edward J. DeMarco, acting director of the Federal Housing Finance Agency, who will speak at the same subcommittee hearing, expressed his reservations about the government’s strategy for revamping housing policy.

"Recently there has been a growing call for some form of explicit federal insurance to be a part of the housing finance system of the future," DeMarco said in a prepared statement. "The potential costs and risks associated with such a framework have not yet been fully explored."

Source: Reuters News, Corbett B. Daly (09/14/2010), and The Washington Post, Zachary A. Goldfarb (09/15/2010)

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