It appears that Washington is finally getting around to grappling with the largest unresolved question left over from America’s housing meltdown: What’s to become of the government-backed mortgage giants, Fannie Mae and Freddie Mac? Their fate has been in limbo since the federal government bailed them out and put them in conservatorship in 2008.
Now, however, the two government-sponsored enterprises (GSEs) are reaping enormous profits as housing markets rebound. This has gotten lawmakers’ attention. House Republicans have introduced a typically radical bill that would eliminate Fannie and Freddie altogether. A bipartisan Senate proposal would wind down Fannie and Freddie over five years and replace them with a similar functioning institution that charges a fee to insure loans in the event of catastrophic losses. And President Obama weighed in recently as well, saying it’s time to end Fannie and Freddie “as we know them.” Though widely misinterpreted as a call to eliminate the GSEs, this artfully ambiguous formulation actually left the president a lot of wiggle room.
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