What is the future for Fannie Mae and Freddie Mac, considered the whitest elephant of the American tax payer? Are these two giant government owned and operated enterprises (GSEs) be left solid or are they to broken into pieces? These questions are everyone’s minds in Washington D.C. Left unanswered these will become a battle royal the likes of which has not been seen in the American economic history.
The Treasury Department is not helping with its little or no transparency activities of using up taxpayer’s money and buying up more and more mortgaged-backed securities. Fannie and Freddie have lost billions of dollars and have been on life support from the government for the past two years.
Before a Congressional subcommittee could shed light to the future of the two giants, the hearing scheduled for next week was inexplicably cancelled. Rep. Barney Frank (D- Mass.), head of the House Financial Services Committee who scheduled the hearing to examine the two companies, vehemently said that the two troubled government lenders should be eradicated and replaced.
Secretary Timothy Geithner stated that the Obama administration has delayed any proposed reforms until 2011.Treasury’s assistant secretary for financial institutions, Michael Barr, said, “We want to make sure that as we move to reform the GSEs, we are focused on retaining market stability in our housing sector. We cannot rebuild securitization markets on the old infrastructure. We look forward to seeing future reform efforts.”
So what are the stakes at risk? Should the government keep the two giants in business at the expense of the taxpayers, or should they be left to die? One or the other, the economy will surely suffer. More than 80% of all U.S. mortgages written are sold to Fannie and Freddie.
After more than a year and a half, there is still no agreement in Congress on the financial reform that could control the financial instruments that ignited the financial crisis rooted in the housing market through risky and dangerous dealing on Wall Street. This same dangerous trading still goes on daily in the shadows of Wall Street, unencumbered by government regulations to dampen the risks that triggered the financial meltdown.
Fannie and Freddie, which stock is still publicly traded on the New York Stock Exchange, are now being directed to operate by the White House. While the Congress and the Treasury Department are working together with little or no guidance, and definitely no direction, to work on the future.