WASHINGTON — Treasury Secretary Timothy Geithner says the Obama administration wants Congress to approve legislation overhauling Fannie Mae and Freddie Mac, the nation’s troubled housing-finance giants, within two years.
In remarks he plans to deliver today to the House Financial Services Committee and released late Monday, Geith ner says that failing to act by then would worsen uncertainty in the financial markets. But he’s also warning that acting too quickly could destabilize the housing-finance market and jeopardize the recovery of the economy.
“Housing is a critical part of our economy, and we will proceed with our plan for reform with great care,” Geith ner said in his statement. “Our objective, after all, is a healthier, more stable housing-finance system.”
Geithner’s comments come as Congress is trying to decide how to reshape the federal role in the housing market, which remains weak with low prices and huge numbers of foreclosures in Florida, parts of the Southwest and other regions.
While both major political parties concede that changes are needed to protect taxpayers and revive private lending, Republicans tend to want to move more strongly while Democrats express more concerns about maintaining the government’s role in helping lower-income families.
Fannie and Freddie guarantee or own about half of all U.S. mortgages, but they nearly collapsed in 2008 and have been kept alive with $150 billion in taxpayer funding.
President Barack Obama wants to reduce the federal role in housing with an immediate, if gradual, increase in fees, capital standards and down-payment requirements as the government looks to wind down Fannie Mae and Freddie Mac, a senior Treasury Department official said Monday.
“There are a number of policy levers the administration can use to wind these two institutions down,” Jeffrey Goldstein, the Treasury Department’s undersecretary for domestic finance, said in prepared remarks to credit unions. “We will work with the (Federal Housing Finance Agency) to begin this process immediately.”
The FHFA regulates Fannie Mae and Freddie Mac, which the government took over in 2008.
Together with federal agencies, Fannie and Freddie have accounted for nine of every 10 new loan originations in the past year.
