By Jeremy Herb, Globe Correspondent
US Representative Barney Frank hopes to “abolish” government-run mortgage lenders Fannie Mae and Freddie Mac because they cannot survive in their current form, the Massachusetts representative said today at a hearing.
"The remedy here is, as I think the committee will be recommending, abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," said Frank, chairman of the House Financial Services Committee. “That's the approach, rather than the piecemeal one.”
While Frank plans to create a new structure to the lending giants, he does not know what shape that will take yet and has no immediate legislation to introduce, a committee spokesman said.
The Financial Services Committee is just starting its work on the issue and plans to move slowly. The committee's first step is to talk to groups like the Center for American Progress and the National Association of Realtors, which have drafted reports on reforming the lending market.
David Min, an associate director for the Center for American Progress, said his organization is suggesting reforms for the system that no longer include Fannie and Freddie.
“We're trying to re-imagine the whole system,” Min said.
Fannie Mae and Freddie Mac are the biggest home lenders in the US. They were taken over by the federal government in September 2008 after nearly collapsing.
Min said that whatever new structure the mortgage lenders would take, any entities receiving government backing would need to be more heavily regulated to limit risk, with greater product restrictions on mortgage-backed securities and higher capital than what Fannie and Freddie had. The Center argues that reforms should apply to both public and private markets.
About Political Intelligence
Glen Johnson is Politics Editor at boston.com and lead blogger for "Political Intelligence." He moved to Massachusetts in the fourth grade, and has covered local, state, and national politics for over 25 years. E-mail him at firstname.lastname@example.org. Follow him on Twitter @globeglen.