Panel Examines Fannie Mae, Freddie Mac Collapse

The controversial mortgage giants Fannie Mae and Freddie Mac take center stage again at a congressional hearing Wednesday. The firms are under federal conservatorship and have burned through $145 billion in taxpayer funds.

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The mortgage finance giants Fannie Mae and Freddie Mac are taking center stage today at a hearing in Congress. The firms are under federal control for the moment, and they've burn through $145 billion in taxpayer funds. Lawmakers are still trying to figure out what to do with them.

NPR's Tamara Keith reports.

TAMARA KEITH: A lot of people would like to see Fannie Mae and Freddie Mac dissolved, blown up, wound down, whatever you want to call it, as soon as possible. That includes a group of Republican senators who tried to get an amendment to wind them down within two years into the Financial Regulatory Reform Bill passed last week. That effort failed. But Democratic Congressman Paul Kanjorski says there are plenty of questions to be answered in the coming months.

Representative PAUL KANJORSKI (Democrat, Pennsylvania): Whether we reconstitute them, whether we disband them, whether we form new organizations and what relationship they have to real estate financing.

KEITH: Kanjorski heads the subcommittee that will examine the state of Fannie, Freddie and their regulator, the Federal Housing Finance Agency. He says a solution for the troubled firms was left out of the sweeping financial regulation in part because it's a complicated situation.

Rep. KANJORSKI: If you try and just handle them in some summary fashion, they could, of themselves, collapse or could cause a collapse of the real estate market, which, in turn, would collapse the economy. And if you do that, we'd be no better off than we were 18 months ago when we started this whole long process.

KEITH: In testimony to be delivered later today, the acting director of the Federal Housing Finance Agency, Edward DeMarco, is expected to say neither Fannie nor Freddie would be capable of serving the mortgage market without ongoing financial support from the U.S. Treasury, and that's going to continue until Congress comes up with a plan for their future.

One bright spot: The quality of the loans purchased by Fannie and Freddie since the government takeover is greatly improved.

Tamara Keith, NPR News, Washington.

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