Fannie and Freddie Face Uncertain Future

By Binyamin Appelbaum

House Republicans have made punching bags of Fannie Mae and Freddie Mac, criticizing the federal bailout of the mortgage giants and promising to end the government’s longstanding use of the companies to reduce the cost of mortgage loans. But the Republican takeover of the House could make that goal more difficult to achieve. Leading House Republicans have been unequivocal in their demands for the government to sever ties with Fannie Mae and Freddie Mac. Representative Spencer Bachus, the Alabama Republican who is likely to become chairman of the Financial Services Committee, has expressed support for legislation that would require the government to start the process immediately. In a recent interview with CNBC, he said that the loss of government subsidies for mortgages might be painful for borrowers but was necessary. “Right now there is an addiction to government funding and we have to break that addiction,” Mr. Bachus said in the interview. “With any addiction there is a long withdrawal process, but you have to start and you have to start now.” Some analysts doubt Republicans will sustain this hard line. Powerful constituencies, including the national associations of real estate agents and home builders, have publicly called for the government to maintain a role in housing finance. So have many leading figures in the mortgage industry. “I would think that it is in nobody’s interest to let this fester, either for financial market reasons or for political ones,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics, which tracks political issues for financial industry clients.

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