The Obama administration will propose dissolving Fannie Mae and Freddie Mac and reducing the federal government’s role in the mortgage market, sources tell the Wall Street Journal. The White House is set to release three plans for moving forward without the government-owned mortgage giants, which originated nine out of every 10 loans last year. Advancing all three plans might prevent an all-out partisan brawl between conservatives, who blame Fannie and Freddie for the financial crisis, and liberals, who say borrowing costs will skyrocket without government help, according to one former Obama treasury official.
"If you focus on the steps everybody agrees on—here are the 10 things you've got to do—that gives people a chance to unite behind a set of steps," he says. Under one of the three plans, the government would exit the market almost entirely. The others would have the government fill Fannie and Freddie’s role as secondary market backstop, either during periods of market stress or at all times.
(More Fannie Mae stories.)
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