Geithner Suggests Three Plans for Winding Down Fannie Mae, Freddie Mac
Timothy Geithner, the Secretary of the US Treasury, delivered a report to Congress Friday outlining three possible options for weening the mortgage industry from its dependence on the government's support. Geithner also cautioned that the changes should be phased in "responsibly and carefully" to avoid disruptions in the overall economy.
Geithner, together with Housing and Urban Development Secretary Shaun Donovan, offered three differing approaches for reforming the housing finance system, all three of which gradually reduce and ultimately unwinf the involvement of mortgage giants Fannie Mae and Freddie Mac. The two entities are believed to have played a huge role in the housing crisis, and needed governemnt bailout money to stay afloat.
Geithner said that a significant re-working of the housing finance system would take between five and seven years.
"I want to emphasize we're going to proceed on this path to reform very carefully, so we make sure we're supporting the process of economic expansion and repair of the housing markets, which of course are still suffering from the damage caused by the crisis," he said.
Geithner did not recommend one of the three options over another, or suggest legislation to execute the plans. But all three plans include an eventual end of taxpayer support for Fannie and Freddie, which have required a combined $150 billion in federal funds to continue operating since being seized in September 2008.
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