Mortgage finance giants Fannie Mae and Freddie Mac will not exist in their current form after a revamp of the U.S. housing finance system. That's the assertion of Michael Barr, Treasury Assistant Secretary for Financial Institutions.
Congress is in the midst of a debate about how to restructure Fannie Mae and Freddie Mac, which have together taken about $150 billion in direct government aid since they were seized two years ago amid mounting losses by then-Treasury Secretary Henry Paulson.
Treasury Secretary Timothy Geithner summoned leaders from the mortgage industry to Washington last month to discuss their future. The administration has promised to lay out by January its vision for the two firms, which buy residential mortgages to free up lenders to lend again. The two firms were created by Congress and any changes to their long-term structure would have to be approved by lawmakers.
"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 Barr made the comments in prepared testimony, obtained by news service Reuters.