Lawmakers to study ways to get back $145 billion spent on propping up Fannie, Freddie

By Alan Zibel, AP
Thursday, July 29, 2010

Congress to try to recoup Fannie, Freddie costs

WASHINGTON — Lawmakers plan to study ways to get back some of the $145 billion the government has pumped into giant mortgage buyers Fannie Mae and Freddie Mac.

Rep. Paul Kanjorski, D-Pa., said in a statement Thursday that hearings to be held in September will look at “innovative ideas for recovering the costs” resulting from the September 2008 federal takeover of the two companies.

Lawmakers also plan to examine ways to reform the entire system for providing mortgages to Americans, which could include a dramatic overhaul of Fannie and Freddie, or their eventual elimination.

The financial overhaul signed by President Barack Obama didn’t address that issue, despite protests from Republicans that it was incomplete without a such a plan. The administration is holding a public conference on Aug. 17 in Washington to discuss the mortgage system.

Fannie and Freddie own or guarantee about half of all U.S. mortgages, or nearly 31 million home loans worth more than $5 trillion. They buy home loans from lenders, package them into bonds with a guarantee against default and sell them to investors.

During the housing boom years, Fannie and Freddie faced political pressure to expand homeownership and competitive pressure from Wall Street to back ever-riskier loans. Defaults and foreclosures piled up, and the government had to take them over.

Rep. Barney Frank, D-Mass., said in a statement that lawmakers plan “a complete restructuring of the tangle of housing finance tools so that we move forward in a way that protects taxpayers, prevents economic turmoil and appropriately serves all aspects of the housing market.”

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