Politics, shaky economy create no rush to restructure Fannie and Freddie

By Zachary A. Goldfarb

The federal government has spent the past half year seeking to roll back its emergency efforts at propping up the financial markets — with the notable exception of its involvement in mortgage giants Fannie Mae and Freddie Mac.  As the government has pledged more and more money to cover the companies’ losses, it has assured the public that planning was underway for overhauling the firms so the bailouts would end. As recently as December, the Obama administration said it expected to release a preliminary report on how to remake Fannie Mae and Freddie Mac around Feb. 1. But no plan was produced, and in response to questions from lawmakers, Treasury Secretary Timothy F. Geithner clarified last month that it would be another year before the government proposes how to restructure the firms.Sixteen months after they were seized to prevent their collapse, the companies remain wards of the state, running a tab that has now exceeded $125 billion in what has become the single costliest component of the federal bailout for the financial system. Some analysts say it’s an inopportune time to wind down the companies — or even hint at major change — while the housing market and economy remain in bad shape. “Any suggestion now about future changes could destabilize the market,” said Karen Shaw Petrou, managing director of analysis firm Federal Financial Analytics and a longtime observer of housing finance policy. “The U.S. mortgage market is so fragile that all Treasury needs to say is ‘boo’ and it could fall apart.”