Ex-Wells Fargo chief executive Richard Kovacevich is on record as saying that Fannie Mae and Freddie Mac should be abolished, but his successor and former top deputy, John Stumpf, has a much different view.

At an investor conference in London Tuesday, Stumpf said that he believes the government-sponsored enterprises need to be retained in some form because the guarantee they provide is important to investors. If investors are skittish about buying mortgages, then banks would have to retain more of the loans, leaving them with less money to lend.

"Our balance sheets aren't big enough to put all these mortgages on our books," Stumpf said.

Fannie and Freddie have been in conservatorship for nearly five years, and it is expected that at some point Congress will take steps to reform them.

Some, like Kovacevich, believe that they should be eliminated once and for all and that the government should get out of the mortgage business.

"The private sector provides mortgages in practically every other major country with little difference between homeownership rate in the U.S. and other developed countries," Kovacevich and co-author William Isaac wrote in a column for American Banker in March. "The U.S. needs a new system that never places taxpayers at risk again, promotes homeownership at affordable levels and transitions from the current model without disrupting the housing recovery taking place."

Stumpf, though, says that government should play some role in housing finance. While he does not believe that Fannie and Freddie should keep mortgages on their books, he does favor a government "backstop" along the lines of the Federal Deposit Insurance Corp.'s backing of deposits.

In his 40-minute presentation that included a question-and-answer session, Stumpf also weighed in on the "too big to fail" debate, arguing the Dodd-Frank Act needs to be given a chance to work before any new legislation aimed at breaking up big banks is considered.

Stumpf said that while he believes "taxpayer money should never be used to support a failing institution," he firmly opposes breaking up the largest institutions. Wells Fargo is the nation's fourth-largest bank holding company, with $1.4 trillion of assets, and is the nation's largest mortgage and small-business lender.

"Banks fuel and support economic growth, and we need banks of all shapes and sizes to support the diverse needs of our diverse economies," he said. "Big banks have unique resources and capabilities to help the economy, including coast-to-coast convenience, a broad range of services and technological innovation."

Still, Stumpf acknowledged that there are too many banks chasing too few loan opportunities and said that the upshot will likely be more consolidation.

Wells, though, is not in position to be buying banks because it already holds 10% of the country's deposits and federal laws prohibit any one bank from exceeding that threshold. The bank continues to eye acquisitions of nonbanks, and is particularly focused on wealth management and brokerage firms, Stumpf said.

"We have about 10% of the nation's deposits, but we only have 1% or 2% of the wealth" assets, he said.

Wells has also been rumored to be interested in a large nonbank lender, like CIT, but when asked by an analyst if it was considering such a deal, Stumpf declined to answer.

"We can't comment, but good try," Stumpf said.

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