Banks To Benefit From Unwinding of Fannie, Freddie

The move to unwind mortgage giants Fannie Mae and Freddie Mac is gathering momentum as Congress and the Obama administration continue to debate how to accomplish it. Privatizing of the nation’s finance system could, in the end, represent a significant boost to the bottom lines of US banks.

Obama’s administration, as well as a number of Congressional Republicans, have proposed eliminating the Fannie and Freddie, which have been controlled by the government since requiring assistance in June 2008 to avoid bankruptcy. It is not clear at this point what, if anything, will serve as a direct replacement for the two agencies.

The elimination of the two mortgage insurers will be accomplished gradually, to avoid destabilization of the housing market. Insiders say that some of the companies’ basic functions, as well as some of their staff, will be shifted to other government agencies including the Department of Housing and Urban Development (HUD) and the Federal Housing Authority.

Treasury Secretary Timothy Geithner said Friday the dissolution of Fannie and Freddie could take between five and seven years to complete. Representatives from Fannie and Freddie declined to comment on the proposal.

Facebook Comments

comments

Share