Rep. Frank Suggests Abolishing Fannie Mae/Freddie Mac as They Are Now

Fannie Mae and Freddie Mac could be history after the House Financial Services Committee completes its review of the housing finance system, and makes its recommendations, according to committee chairman Barney Frank, D-Mass., once a huge supporter of the two. "I believe this committee will be recommending abolishing Fannie Mae and Freddie Mac in their present form," Rep. Frank said during a committee hearing. Earlier this month, Chairman Frank said he plans to hold hearings on restructuring the U.S. housing finance system and he has no desire to see Fannie and Freddie return to their former "hybrid" status as private companies with a public mission. The White House is expected to lay out its blueprint for the two in the next month or so but has offered little guidance on the issue. Rep. Frank's remarks sent the share price of the two tumbling Friday afternoon. The government-sponsored enterprises have been wards of the government for 17 months. Since their takeover, Treasury has pumped $110.6 billion into them to keep their net worth positions above zero, allaying investor fears about their debt and MBS. Presently, the two provide liquidity for roughly 70% of all originations in the U.S. mortgage market with FHA accounting for most of the balance.