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Bill Radke: The government's hearing on what to do about Fannie and Freddie wrapped up yesterday. Today, the general consensus is: Goodbye Fannie and Freddie. Hello... What exactly?
Marketplace's Gregory Warner reports.
GREGORY WARNER: Barney Frank says Fannie and Freddie have to go. The chairman of the House Financial Services Panel -- former champion of the government-backed system -- now says the federal government should not be a "backstop" in the mortgage crisis. The only question, he says, is what to put in their place.
Treasury Secretary Timothy Geithner sounded a similarly ambiguous note at yesterday's hearing. Signaling the end of Frannie Mae and Freddie Mac, and the beginning of... something.
Timothy Geithner: These were avoidable failures, and it is our responsibility to make sure we create a system that is not vulnerable to these same failures happening again.
At stake is the future of the 30-year fixed-rate mortgage that Americans have come to depend on. Without Fannie and Freddie as the big gorillas in the room, the government will still need a way to assure banks they'll get back for millions of mortgages. Otherwise private banks won't make those loans.
A world without Fannie might move the government from being on the first string to being on the bench in case a recession or banking crisis happened. Those loans would need to be covered by taxpayers only if things went bad in the housing market.
In Philadelphia, I'm Gregory Warner for Marketplace.