As policy makers work to ease the strain on the mortgage giants Fannie Mae and Freddie Mac, a consensus is emerging that the two companies will have to look substantially different in the long term.
Leading figures from across the ideological spectrum say that the companies, which were created by Congress to support the housing market, must be restructured so that they do not threaten the financial system. These voices include Republicans, many of whom have long been critical of the outsize roles of Fannie Mae and Freddie Mac in the mortgage market, and some Democrats, who have generally been more supportive of the companies.
Proposals for the companies include making them government-owned and breaking them up into smaller firms, phasing them out of existence entirely, or simply limiting their operations to certain core areas like affordable housing as well as limiting their ability to borrow money.
On Wednesday, speculation about a government intervention sent shares of the companies tumbling by more than 20 percent. The stocks have plunged more than 60 percent this month, with Fannie Mae ending the day at $4.40 and Freddie Mac at $3.25. The price of bonds issued by the companies surged, meanwhile, as some investors indicated that any effort by the Treasury Department to help the companies would benefit bondholders. (See a discussion of potential bailout options below.)