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Washington
Treasury housing plan could eliminate GSEs
WASHINGTON (2/10/11)—Government-sponsored enterprises Fannie Mae and Freddie Mac, and the concept of government-backed mortgages itself, could be eliminated under a U.S. Treasury plan, Bloomberg News has reported. GSE elimination is one of three options that will soon be presented by Treasury Secretary Tim Geithner, the Bloomberg story said. White House Press Secretary Robert Gibbs confirmed that that presentation would be made before Congress this Friday. The Treasury is also expected to suggest a gradual phasing out of government guaranteed mortgage-backed securities, thus restricting government intervention in the mortgage market to only the worst of financial situations. Geithner will also propose an incremental reduction in the government’s support of the GSEs as a third option. The conforming loan cap, which currently stands at just over $729,000, would also be reduced under one proposal. The Treasury will stop short of proposing specific legislation, and sources told Bloomberg that the proposal could change before it is delivered to the Congress. GSE reform, and, more specifically, transitioning the GSEs out of their current conservatorship was the focus of a Wednesday hearing before the House Financial Services Committee’s capital markets subcommittee. Republican House members and other GSE critics have taken issue with taxpayer costs associated with the government takeover of Fannie Mae and Freddie Mac. The Credit Union National Association (CUNA) also weighed in on the GSEs early last month, supporting "meaningful, comprehensive efforts" to address numerous GSE-related issues. In a letter sent to Geithner, Consumer Financial Protection Bureau architect Elizabeth Warren, and House and Senate financial committee leaders, CUNA recommended that the government find a way to promote housing market efficiency, even if Fannie and Freddie are replaced. The government should also develop a strong supervisory system for secondary mortgage market participants, and that secondary mortgage market should remain open to all parties, CUNA added.


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