Republicans Want To End Federal Control Of Fannie Mae And Freddie Mac (FNM, FRE)

On Monday, the Senate resumed the debate on legislation to overhaul financial regulation. According to the Washington Post, the Republican Senators are now pushing for an amendment that will wind down the government-controlled mortgage finance giants Fannie Mae FNM and Freddie Mac FRE. This proposal by Senators John McCain, Richard C. Shelby and Judd Gregg calls for the government to end its control of the companies within two years. Under the amendment, Fannie and Freddie would have to reduce the size of their mortgage portfolios and begin paying state and local sales taxes. As per the terms of the government's 2008 emergency takeover of Fannie and Freddie, the Treasury must put in money into the firms whenever its net worth becomes negative. Democratic lawmakers and the Obama administration have resisted efforts to close down the companies, warning that they play an important role in supporting the housing market. The Senate banking committee's chairman, Christopher J. Dodd, called the Republican amendment “reckless” and “poorly thought out,” saying it would shutter Fannie and Freddie without offering a replacement. “There's no reform here,” he said on the Senate floor. “It just gets rid of something without replacing it with anything.” While introducing the amendment last week, McCain said Congress must address Fannie and Freddie. “Fannie Mae and Freddie Mac are synonymous with mismanagement and waste and have become the face of too big to fail,” McCain said. “The time has come to end Fannie Mae and Freddie Mac's taxpayer-backed free ride and require them to operate on a level playing field.”