LYNN NEARY, host:
This is MORNING EDITION from NPR News. I'm Lynn Neary.
RENEE MONTAGNE, host:
And I'm Renee Montagne. Good morning.
Mortgage giant Fannie Mae and Freddie Mac have gotten more federal bailout money than anyone else - $145 billion. This week they asked for $8.5 billion more. But the Senate still can't agree on what their future should look like. NPR's Audie Cornish has the story.
AUDIE CORNISH: The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation were created by Congress in order to increase the amount of money available for home loans. But they're actually hybrid organizations with both shareholders and Congress to please.
The so-called government sponsored enterprises don't make mortgages. They buy them from the banks that do, then sell bonds based on those home loans. Fannie and Freddie got into trouble when they jumped into the subprime mortgage market with Wall Street.
Of course Republicans and Democrats differ on what happened next. Those like Arizona Senator John McCain say the GSEs were central to the crisis.
Senator JOHN MCCAIN (Republican, Arizona): This is one of the prime reasons why 48 percent of the homes in Arizona are underwater, where people are throwing keys in the middle of their living room floor because they can't afford to make the payments. The enablers were Fannie Mae and Freddie Mac.
CORNISH: Democrats like Banking Committee chairman Chris Dodd disagree.
Senator CHRIS DODD (Democrat, Connecticut): Unregulated brokers, unregulated mortgage companies that were luring people into mortgages they could not afford, with no documentation, no background checks whatsoever. That is the genesis of this whole issue. It's not Fannie and Freddie.
Mr. RAJ DATE (Director, Cambridge Winter Center): Both arguments, unfortunately, are pretty overstated.
CORNISH: Raj Date is a former banker and head of the Cambridge Winter Center. Date says although Fannie and Freddie didn't start the crisis, they certainly made things worse, and the roots of their actions lie with Congress.
Mr. DATE: Both parties accepted a lot of money from the GSEs during the heyday. Both parties found it politically convenient to let them grow over time and to let their risk grow basically unchecked. There's a problem that's obvious now, and they ought to solve it.
CORNISH: Fannie Mae and Freddie Mac went from government-sponsored to government-owned in late 2008, when they began to buckle with the housing market. Since then, taxpayers have poured more than $145 billion and counting into those institutions. And that's got to stop, says Alabama Republican Richard Shelby.
Senator RICHARD SHELBY (Republican, Alabama): You know, in Fannie and Freddie we're not putting a bandage on them, we're not covering it up. That's an open wound. It's still bleeding, hemorrhaging, every day.
CORNISH: Republicans tried and failed last night to get an amendment in the Senate financial regulatory bill that would've pulled government aid from the companies, let their charters expire and eventually transition them to the private sector.
Sen. MCCAIN: We are not saying that Freddie and Fannie have to go out of business. We are saying we want them to be a business that is on a level playing field with other private-sector competitors.
CORNISH: But Obama administration officials want to put off any major changes till next year. And the main author of the financial regulatory bill, Chris Dodd, agrees.
Sen. DODD: Now, today there's no backup. If 96.5 percent of mortgages are backed by these two institutions right now, what replaces it? And there isn't any in this amendment. So you're left in a free fall. Who gets hurt? Average Americans - that's who gets hurt.
CORNISH: So instead, the Senate approved an amendment requiring the Treasury to do a study on whether to dissolve, privatize or break up Fannie and Freddie into smaller companies.
In the meantime, the Obama administration has pledged unlimited financial support to keep the institutions going.
Audie Cornish, NPR News, the Capitol.
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