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For government, temporary can mean forever

March 3, 2009 at 8:17 AM
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WASHINGTON, March 3 (UPI) -- At least a portion of two U.S. government sponsored mortgage giants will remain in public hands indefinitely, U.S. Rep. Barney Frank, D-Mass., said.

The Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association both fell into conservatorship last year after losing billions to mortgage write downs.

At the time, the promise was to strengthen Freddie Mac and Fannie Mae and return them to private operations, The New York Times reported Tuesday.

But, lawmakers may be loath to give up the leverage on the housing market and repaying the $400 billion plus interest needed to regain independence will take as long as a century, the Times said.

"Some of what these companies did will be returned to the private sector and some of it is going to remain with a public entity," said Frank, chairman of the U.S. House of Representatives Financial Services Committee.

The two firms' holdings include about half the bundled U.S. mortgage securities, giving them unparalleled leverage in the mortgage game.

When Freddie and Fannie make a move, other banks follow suit.

"Once government gets a new tool, it's virtually impossible to take it away," Rep. Scott Garrett, R-N.J., told the Times "And Fannie and Freddie are now tools of the government."

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