Fannie & Freddie's Future: The Experts Weigh In
The future of government-sponsored mortgage lenders Fannie Mae and Freddie Mac remains a big cloud over the markets. CNBC asked the experts what they think should be done with the troubled lenders.
Rebuilding Fannie & Freddie
“We have to end the government subsidies. We have to end the idea of ‘too big to fail.’ The regulator has to make it clear that in the future if Fannie and Freddie’s debts exceed their assets, they become insolvent, then they won’t be too big to fail ... If the regulator limits Fannie and Freddie’s ability to invest for their own portfolio, then they’ll shrink. They can still carry on their mission to make the secondary market, but they will cease to be this huge hedge fund arbitraging their lower borrowing costs.”
- John Snow, Cerberus Capital Management Chairman
Fannie, Freddie & Regulators
“I don’t think you need to do anything at this point, except for the Treasury to make a clear statement about standing behind Fannie and Freddie’s debt. I don’t think they’re broke. I think they’ve got the loan-loss reserves and the capital to see this crisis through as long as the regulators don’t’ allow it to get worse.”
- Susan Woodward, Former SEC & HUD Chief Economist
Nationalizing Fannie & Freddie
“They have to go. It’s just a reality; it’s numbers. At 100 over 150 over Treasurys, these entities cannot survive, and the only way you can stabilize them and get those spreads down as private entities is if you go out and raise $400 or $500 billion dollars in real equity, and we’re not going to do that. We have to recapitalize the banks, so we’ve got to get the GSEs (government-sponsored entities) off the table now; this week would be good. If the Treasury can have that 15-minute press conference we can get on with it.”
- Chris Whalen, Institutional Risk Analytics Senior Vice President
Frank On Fannie & Freddie
"I do believe that the basics of Fannie Mae & Freddie Mac are still okay. Shareholders in both Fannie Mae and Freddie Mac are taking a terrible beating. There was this incredible misperception that somehow they are being sheltered; they have lost a lot of money... I think if you look at the basics, there's still some soundness there."
- Barney Frank, U.S.Representative (D) Massachusetts