WASHINGTON Both presidential candidates Barack Obama and John McCain said on Sunday they see the federal takeover of mortgage finance companies Fannie Mae and Freddie Mac as necessary.
Republican McCain supports the federal takeover of mortgage finance giants Fannie Mae and Freddie Mac but wants eventual privatization, his advisors said.
"The long-term reforms are to scale down Fannie and Freddie so their size is no longer a threat. And then privatize them. Get them off the taxpayer's books entirely," said McCain's chief economic adviser, Douglas Holtz-Eakin.
But credit markets must stabilize first, he said.
"The next steps would be to have credit market conditions stabilize and have the ability, as a result, for firms to access capital again so that they can scale down their portfolio holdings," he said in a telephone interview.
Obama, in Chicago, said that the step was necessary to prevent a deeper economic crisis and he would be reviewing the Treasury plan.
"Given the substantial role that Fannie Mae and Freddie Mac play in our housing system, I believe that some form of intervention is necessary to prevent a larger and deeper crisis throughout our entire economy," Obama said in a statement.
The U.S. government on Sunday seized control of Fannie Mae and Freddie Mac, quasi-public mortgage companies which own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt, in what could be the largest financial bailout in U.S. history.
The two companies, publicly traded but also serving a government mission to support housing, were put in a conservatorship that allows their stock to keep trading but puts common shareholders last in any claims. Their top executives were ousted.
Obama said the plan for Fannie Mae and Freddie Mac needed to focus on strengthening the economy and helping struggling homeowners rather than focusing on "the whims of lobbyists and special interests."
McCain adviser Nancy Pfotenhauer, appearing on CNN's "Late Edition," called the companies an example of "crony capitalism" that allowed private investors to reap profits but left taxpayers liable for the risks. The companies' political supporters should be held accountable, she said.
(Reporting by Jason Szep with McCain in Albuquerque, New Mexico, Deborah Charles with Obama in Chicago and Randall Mikkelsen in Washington, editing by Jackie Frank)