Group warns against privatizing Fannie, Freddie

“Privatizing Fannie Mae and Freddie Mac will exacerbate problems in the housing market, not solve them,” said John Taylor, president and chief executive officer of the NCRC. “If the goal is to reduce risk to the financial system, and to the taxpayer, then why would you migrate the effective management of the housing market to Wall Street? Why let the very industry that ruined the housing market take control of it?”

While the administration’s report is not out yet, it reportedly will lay out several options for the nation’s housing system, one of which would completely eliminate Fannie and Freddie and dramatically reduce the government’s role in the housing market. The two government-sponsored enterprises (GSEs) have been under government control in a federal conservatorship for over two years.

The fight over what to do with Fannie and Freddie is expected to be a long one. The House, now controlled by Republicans, held its first hearing on the matter Wednesday. The House Financial Services Committee’s subcommittee on capital markets and the GSEs delved into what should be done with the mortgage giants, after Republicans spent time in the minority of the last Congress blasting Democrats for failing to do something about Fannie and Freddie.

At the hearing, Republicans said they wanted to free the nation’s housing system from government influence, which they argued was distorting the market and hiding risk. However, Democrats repeatedly aired concern about a government-free housing system, warning that it could make affordable mortgages more difficult to get.

Rep. Barney Frank (D-Mass.), the ranking member on the full committee, told Bloomberg Television Wednesday that he sees some sort of agreement being reached “by the end of this year.”