“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.
Fannie Mae and Freddie Mac are vital players in the mortgage industry, purchasing home loans from lenders and selling them to investors. They own or guarantee about half of all residential mortgages. Had they gone broke in 2008, millions of people would have been unable to get mortgages.
The administration’s Republican critics have argued that President Obama should have proposed sweeping changes to Fannie Mae and Freddie Mac last year, when he demanded an overhaul of financial regulations. The administration had been expected to announce its plans this month when it submitted its 2011 budget request.
“We want to make sure that we are proposing these changes at a time when we have a little bit more distance from the worst housing crisis in generations,’’ Geithner said.
That argument is exactly the opposite of the case Geithner is making for new financial regulations. Geithner is pressing Congress to move swiftly on new Wall Street rules, saying action must occur before memories of the financial crisis recede.
“We can’t do everything right away,’’ he said.
But Congress might 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 yesterday, 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.
