Fannie Mae, Freddie Mac could be split

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WASHINGTON (AFP) – The US government could split troubled state-backed mortgage firms Fannie Mae and Freddie Mac and place the firms’ toxic assets in a federal corporation, The Washington Post reported.

The deal could allow the financial giants, long lynchpins of the US housing market, to move forward unconstrained by troubled assets — easing still constricted credit markets with the hope of driving consumer spending.

Together, the two firms back 40 percent of all US home loans.

A “good bank, bad bank” structure was needed for the move, the chief regulator of the companies, James Lockhart, told the Post in an interview where he also announced he would step down later this month.

The proposal, the Post said, was scheduled to be taken up by the White House’s National Economic Council Thursday, although discussions were said to be in early stages.

Internal discussions over the fate of the companies began earlier this year as part of plans to reform the regulatory system, and were now entering a “more serious phase,” the paper said.

Fannie Mae and Freddie Mac have received hundreds of billions of dollars as part of a virtual government takeover aimed at avoiding their collapse in the wake of the subprime mortgage crisis.

Original article

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