By Nick Timiraos | The Wall Street Journal
Against a steady volley of criticism over plans to wind down Fannie Mae FNMA -3.76% and Freddie Mac, FMCC -2.26% top Obama administration officials defended a bipartisan bill to overhaul the mortgage-finance system as the best—and possibly only—chance to settle the firms’ fate 5½ years after their rescue.
The administration’s public push comes as the Senate Banking Committee on Tuesday will consider legislation to phase out the companies and replace them with a new system through which private firms could package mortgages into government-guaranteed securities. Analysts say the bill needs significant backing from the 22-member panel to have any chance of moving through the Senate ahead of this fall’s midterm elections.
Fannie and Freddie—which don’t make loans but instead buy them from lenders and package them into securities that are sold to other investors—were rescued in September 2008 to prevent a wider housing-market collapse. There is no formal mechanism for the companies to exit government control absent an act of Congress or the Treasury Department, and if the bill falters, the companies’ government control would continue indefinitely.
Even if the bill wins Senate approval, many analysts are dim about its prospects in the House, where conservatives have advanced a bill with no Democratic support.
