From the NY Times:
As the Obama administration prepares a report on the future of Fannie Mae and Freddie Mac, some of the nation’s largest banks are offering a few suggestions.
Wells Fargo and some other large banks would like private companies, perhaps even themselves, to become the new housing finance giants helping to bundle individual mortgages into securities — that would be stamped with a government guarantee.
A spokesman for the Treasury declined to comment on the administration’s plans, but one former Treasury official warned against the banks’ proposal.
“I don’t think that private shareholder-owned entities should issue federal government guarantees,” said Michael S. Barr, who worked on housing issues at the Treasury Department until the end of last month and then returned to his job as a law professor at the University of Michigan. “I think that creates the same conflict we had in the past.”
Mr. Barr said that banks with the largest mortgage businesses had suggested that they be allowed to issue the government’s guarantee, setting themselves up as a second-generation of Fannie and Freddie. As for the two housing giants, Mr. Barr said, “No one argues for Fannie or Freddie to continue in their current form. It’s just not politically plausible.”
If the government decides to continue offering a guarantee for a broad swath of securities backed by mortgages to middle-class homeowners, it does not have to use a private company. A government agency could issue that guarantee, much the way the Federal Housing Administration does now for borrowers with lower incomes or other factors that disqualify them from conventional loans.