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Congress Failed to Save Fannie, Freddie: Lockhart

The collapse of Fannie Mae and Freddie Mac one year ago was the result of bad government policy that took too long to be corrected, Jim Lockhart, the GSE's former regulator, told CNBC.

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“The problem was that Congress allowed them to be leveraged well over 100 to one, and we were asking since the day I took the job, three and a half years ago, for legislation to fix it,” said Lockhart, who recently left the FHFA to take a job with billionaire investor Wilbur Ross. “It didn’t happen until a little over a year ago and by then it was only about 40 days until the conservatorship.”

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Even though Freddie reported a small profit last quarter, Lockhart said he does not think that will continue.

The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage
The Crisis: 1 Year Later - A CNBC Special Report - See Complete Coverage

What's more, Fannie and Freddie will also not be able to repay the government in full to cover the cost of their bailouts, he said.

Lockhart was more positive about the prospects for the housing market, saying he expects an increase in prices in 2010, the first in several years.

“I think we are starting to stabilize,” said Lockhart. “I think some of the programs that have been put in place, they are little slow, but we are starting to get progress on the refinancing program, the modification program and certainly mortgage rates are at a point were they are very attractive.”

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