Democrat Frank says abolish Freddie and Fannie: report

WASHINGTON Wed Aug 18, 2010 6:25am EDT

Representative Barney Frank (D-MA) gestures during a news conference on issues before the House Financial Services Committee on Capitol Hill in Washington, in this November 3, 2009 file photo. REUTERS/Jonathan Ernst

Representative Barney Frank (D-MA) gestures during a news conference on issues before the House Financial Services Committee on Capitol Hill in Washington, in this November 3, 2009 file photo.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - Fannie Mae and Freddie Mac should be abolished rather than reformed as part of the Obama administration's planned overhaul of the government's role in housing finance, Rep. Barney Frank, chairman of the House Financial Services committee, said on Tuesday.

"They should be abolished," Frank said in an interview on Fox Business, when asked whether the mortgage giants should be elements in housing market reform. "They only question is what do you put in their place," Frank said.

The Federal Housing Administration should be fully self-financing and Freddie and Fannie should be replaced with a new mechanism to help subsidize housing, Frank said in the interview.

"There is no more hybrid private-public," the Massachusetts Democrat suggested. "If we want to subsidize housing then we could do it upfront and let the budget be clear about that."

Fannie Mae and Freddie Mac were government-sponsored enterprises, privately owned companies supported by the government, until the Bush administration took control of the companies in 2008 to save them from collapse.

Frank said that he does believe the federal government should have a role in building affordable rental housing but thinks money should go toward projects by private developers.

On the question of whether the government should still provide some guarantees in the mortgage market, Frank said: "If we have it (guarantees), it has to be self-financed by the people who are benefiting."

Frank commented after Treasury Secretary Timothy Geithner convened a Washington conference of housing industry leaders to hear ideas about reforms for the $10.7 trillion mortgage market.

The firms' pursuit of growth and profits helped precipitate the financial crisis of 2007-2009, but their vast resources also helped minimize its impact.

Together, Fannie and Freddie and the Federal Housing Administration now back 90 percent of new U.S. home mortgages.

Fannie and Freddie have received $150 billion in taxpayer bailout money.

In the Fox Business interview, Frank also was critical of public policy that promoted homeownership at any cost. He also said the federal government should not be a "backstop" in guaranteeing mortgages.

"There were people in this society who for economic and, frankly, social reasons can't and shouldn't be homeowners," Frank said. "I think we should, particularly, stop this assumption that you put everybody into homeownership."

"Public policy has been too much to try to push people into homeownership."

(Reporting by Joanne Allen; editing by Sofina Mirza-Reid and Carol Bishopric)

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Comments (19)
Now, personally, I dislike Barney Frank. I’ve seen too many interviews where he’s flat-out lied about his policies and voting records. But I got a little tickled reading this interview. The democrats are coming to the table in places where they can compromise or completely agree with the conservative agenda, which is how politics should work: Identify Problems, Suggest Solutions, Find Solutions We Agree On, Implement Them.

But the Republicans have been vilifying the Democrats for so long, especially Barney Frank, that it will now be impossible for them to say they agree! They either have to admit they were wrong about the person and agree to work with him, or they have to backtrack off their platform into even deeper extremism like the Tea Party.

I’ll be very interested to see how they react. I hope you’re all paying attention, as well.

Aug 18, 2010 9:03am EDT  --  Report as abuse
hexazebra wrote:
I agree with “federal government should not be a backstop in guaranteeing mortgages”. The banks are financing the cars, mortgages etc. for making profit and government should leave it at that.

Aug 18, 2010 10:02am EDT  --  Report as abuse
bobSmith wrote:
What!? Republicants and Democras actually agree on an issue … ANY issue!? (Politician A: “The sun sets in the west” Politician B: “No it doesn’t! That’s a liberal lie!”) I think their collective heads would all explode! The mere suggestion of such a horrible, sinful, egregious concept as “compromise” is worse than taboo!

Aug 18, 2010 10:03am EDT  --  Report as abuse
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