US Considers Remaking Fannie and Freddie

[steelmania75]

From Washington Post:

The Obama administration is considering an overhaul of Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market, government officials said.

The bad debts the firms own would be placed in new government financial institutions -- so-called bad banks -- that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate.

The moves would represent one of the most dramatic reorderings of the badly shattered housing finance system since District-based Fannie Mae was created by Congress to support mortgage lending during the Great Depression. Both Fannie Mae and Freddie Mac, based in McLean, have government charters to buy home loans from banks, which they then repackage and sell to investors. The banks can then use the proceeds to offer more loans to home buyers.

The leviathans became emblematic of the financial crisis when they were effectively nationalized last September amid a market meltdown that revealed much of their holdings to be troubled. The government has since pledged more than $1.5 trillion, including $85 billion in direct aid, to keep the mortgage market working through Fannie Mae and Freddie Mac.

The proposal, which is preliminary and one of several under discussion, is scheduled to be taken up by the White House's National Economic Council on Thursday.

Read more here:

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/05/AR2009080504063.html

Thoughts?

[TexasObserver]

1. RTC II ... gotta be done

[steelmania75]

3. yep

[TexasObserver]

2. Recommend

[steelmania75]

4. This is important. This is a key part of recovery right here.