Geithner: No change to Fannie, Freddie until 2011

By Jim Kihnhenn


The Obama administration will wait until 2011 to propose an overhaul of mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner said Wednesday, arguing that he wanted to put some distance between a new system and what he called “the worst housing crisis in generations.” Geithner also told lawmakers the administration had no intention of including the two entities in the federal budget, even though they were taken over by the government in 2008 as they faced mounting losses from mortgage defaults. “That’s going to be a difficult set of reforms, but we do not believe it’s necessary to consolidate the full obligations of those entities onto the balance sheet of the federal government at this stage,” Geithner told the House Budget Committee. But Congress may move faster on the future of the mortgage giants. House Financial Services Chairman Barney Frank plans a hearing within two weeks on their future. And Federal Reserve Chairman Ben Bernanke, testifying before that committee on Wednesday, urged a swift response. “The sooner you get some clarity about where the ultimate objective is, the better,” he said. In a way, Geithner’s delay could give Frank room to devise his own plan. “I think he’s going to move forward, perhaps with a bit of pique at not having the administration’s guidance, but with a lot more freedom,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics, a consulting firm that advises financial institutions. Geithner called for measures that make sure “the government is playing a less risky, but more constructive, role in supporting housing markets in the future.”