Restructuring Fannie/Freddie

Report:

Mortgage lending giants Fannie Mae and Freddie Mac would qualify to sell bad mortgage assets to the federal government under the Emergency Economic Stabilization Act of 2008 (EESA), signed into law last Friday. But according to James B. Lockhart, director of the Federal Housing Finance Agency (FHFA), which was named conservator when the government took control of the two companies on September 7, a decision to participate in lawmakers' $700 billion rescue plan has not yet been reached.

Lockhart told C-SPAN during an interview Sunday that only two to four percent of Fannie and Freddie's $5.4 trillion in outstanding debt are bad mortgages. According to Lockhart, perhaps the two entities' strongest role in the current financial crisis is to continue their mission of buying up banks' new mortgages to foster the free flow of credit once the Treasury's plan has enabled institutions to resume lending. According to a Reuters report, the first asset sale under the Treasury program is not expected to take place for at least four weeks.

In the months to come, lawmakers and the next Administration will still need to determine the structure of Fannie and Freddie – will they continue as publicly traded government-backed enterprises or move more toward privatization?