WSJ: Obama administration says Fannie, Freddie reform ‘too hard’ 

With the Senate blazing ahead with sweeping financial reform bill, most sensible people are asking why they aren’t touching Fannie Mae and Freddie Mac. Few disagree the two government-sponsored entities’ distortion of mortgage markets played a major role in the current financial crisis and taxpayers can’t be happy about the ongoing bailouts in excess of $100 billion. And yet, Democrats still consider Fannie and Freddie reform off the table, notes this Wall Street Journal article:

“The administration has put it on the ‘too hard’ pile,” says David Felt, a former senior lawyer at the companies’ federal regulator who presided over the government takeover of the companies in 2008.

Among the reasons for the hands-off approach: Freddie and Fannie are playing a bigger role in the housing market today than before the bust; the Obama administration says it’s reluctant to address the firms’ future until markets are more stable. Together with the Federal Housing Administration, Fannie and Freddie guaranteed 96.5% of all new home loans last quarter. Officials fear hasty action could send a recovery into reverse.

Republicans, meanwhile, introduced a measure during the financial-overhaul debate that detailed how to wind down the companies, but the amendment, which was defeated, didn’t specify what would take their place.

Color me skeptical that anything positive will come of Congress’ reluctance to act.

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Mark Hemingway

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