Wall Street’s biggest banks — reportedly including Wells Fargo, Morgan Stanley, Goldman Sachs, and Credit Suisse — are trying through third parties and private meetings with Treasury officials to push government housing giants Fannie Mae and Freddie Mac offstage and put themselves in charge of mortgage lending, reports The New York Times.
Although probably inevitable, some banks worry that the end of Fannie and Freddie would wipe out the 30-year mortgage, the bedrock of American homeownership.
Nevertheless, public financing of mortgage liquidity might not recover, which raises serious questions about long-term housing values.
“In general we still support those positions because we think they are ways of bringing private capital back into mortgage finance,” John P. Gibbons, an executive vice president of capital markets at Wells Fargo Home Mortgage, told the Times.
A report due later in the month should address the two government entities, which foster the mortgage industry by buying up loans made by private banks in order to keep lending rates low.
Aggressive growth by Fannie and Freddie, encouraged by Congress, fed the recent housing boom. Keeping the government lenders alive is also not likely, according to Times sources.
Meanwhile, Rep. Jeb Hensarling, R-Texas, says he will reintroduce legislation to wind down the two entities in short order — within five years.
Both are currently under government control, having taken on $150 billion in direct aid since Treasury seized them in 2008, according to Reuters.
"What is absolutely nonnegotiable is getting the taxpayer off the dime and ensuring that these are no longer government sponsored enterprises, implicitly or explicitly, or in any single way," Hensarling told reporters on Capitol Hill.
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