The Hill News

The Romney-Gingrich political grudge match over Freddie Mac presents an opportunity to ask a basic question: Why are Fannie Mae and Freddie Mac still operating? Michael Williams’ recent resignation as CEO of Fannie Mae has set up a struggle over the direction of the two mortgage behemoths. It comes just a few months after Freddie Mac’s chief executive Ed Haldeman announced his departure. Will the two mortgage giants continue to muddle along in conservatorship as they have since September 2008, or will these resignations act as a catalyst to put them in receivership and wind down their operations? The latter scenario would enable taxpayers to put the fiscal disaster of these two government-sponsored enterprises behind them.
 
Back in August 2008 then-Treasury Secretary Paulson pulled a team together to work on resolving the deeply insolvent Fannie and Freddie. As recounted in the Andrew Ross Sorkin book, "Too Big to Fail", Robert Scully of Morgan Stanley lai! d out a blunt question: “Do you want to kick the can down the road?” Secretary Paulson was emphatic:  “No. I want to address the issue. I don’t want to leave the problem unsolved.” Although it took guts for Paulson in combination with the Federal Housing Finance Agency to take control of Fannie and Freddie and place them in conservatorship, the problem of the two mortgage behemoths is by no means ‘solved.’ In taking control, Paulson highlighted the “flawed business model” underlying the pair.

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