Tim Geithner may not have a plan now — but he will soon.
Nearly a year and half after the two pillars of the country’s mortgage industry imploded, the government has not tackled the problems of Fannie Mae and Freddie Mac.
Yesterday, members of the House Financial Services Committee pressed the treasury secretary for a near-term plan to recast or scale down the beleaguered mortgage giants.
Legislators complained that President Obama’s administration had dropped the ball in putting together plans for the possible dissolution of Fannie and Freddie. The entities, which guarantee nearly 70 percent of all housing loans in the US, collapsed as the subprime mortgage plague spread to other, higher quality housing loans. They are now 80 percent owned by taxpayers.
Rep. Barney Frank, chairman of the committee, argued that although there appeared to be consensus that something needed to be done about Fannie and Freddie, no one from Obama’s team seemed to have any clear answers.
Geithner told the committee that the administration was working on a reform proposal and would take a “fresh, cold, hard look at the core problems in our system.”
Some of the ideas being floated include eliminating the institutions altogether, significantly shrinking them or recreating the structures of the entities, which were set up to encourage mortgage lending.
“You won’t have to wait forever,” Geithner said to members about how long reform of the mortgage companies might take. But he did say that some form of government guarantees would have to be part of the overhaul.
He also warned committee members that the vital housing system was still fragile and that abolishing the companies wasn’t prudent.
Meanwhile, The National Association of Realtors, also warned against eliminating Fannie and Freddie entirely.