Can Fannie, Freddie repay US bailout?

Congress will review the problems at housing-finance lenders Fannie Mae and Freddie Mac before November's elections after all, US House of Representatives banking committee boss Rep. Barney Frank (D-Mass) and his lieutenant Rep. Paul Kanjorski (D-Pa.) promised last night. Kanjorski added that he expects the government-backed mortgage finance giants to repay billions in bailout costs.

"The committee will continue its series of hearings on the future of housing finance in September," they said in a statement. Kanjorski "will conduct an oversight hearing of the (Government-Sponsored Enterprises), and the full committee will continue its examination of policy options for restructuring the nation's housing finance system."

The pair passed over assigning (or accepting) responsibility for Fannie's and Freddie's multi-billion-dollar deficits, and instead took credit for the ensuing bailouts: "By passing the legislation in 2008 that allowed the Bush administration to put the GSEs into conservatorship and by finally enacting strict prohibitions against the sort of reckless, predatory and subprime loans that have been made in the mortgage market, we have completed the initial, defensive steps needed in the housing area."

Frank added: "We will continue our efforts as we move to the next phase, a complete restructuring of the tangle of housing finance tools so that we move forward in a way that protects taxpayers, prevents economic turmoil and appropriately serves all aspects of the housing market," said Frank.

Kanjorski: "The landmark Wall Street reform law has laid the foundation for reforming our housing finance system by altering securitization rules, protecting against inflated appraisals, and holding rating agencies accountable... In September we will examine taxpayer protection issues in greater depth.  In particular, we intend to explore the Federal Housing Finance Agency's recent efforts to recoup funds from the issuers of the underwater securities purchased by Fannie Mae and Freddie Mac.  We also will examine the present policies related to calculating guarantee fees, including whether these charges are appropriately priced to cover risks and provide a reasonable return...

"As our housing markets begin to stabilize, we will begin to consider innovative ideas for recovering the costs resulting from the decision to place Fannie Mae and Freddie Mac into conservatorship.  Twenty years ago, we found a way for industry to pay back the sizable U.S. Treasury payments for resolving the savings-and-loan crisis.  We can do it again." More from the House Financial Services Committee here.