A key U.S. lawmaker said Thursday he plans reintroduce legislation to wind down mortgage giants Fannie Mae (FMNA) and Freddie Mac (FMCC) within five years but is willing to consider adjusting that timetable.

Rep. Jeb Hensarling, (R., Texas), the House's fourth-highest ranking Republican, said he is working on legislation that would eliminate the government's ties to the mortgage giants, which have cost taxpayers about $134 billion since they were placed in a federal conservatorship in September 2008.

A bill introduced by Hensarling last year would have started cutting the government's ties to the mortgage giants or begin winding them down in two years. If they were deemed financially viable, they would become fully private within five years. Hensarling's approach creates no new government structures to replace Fannie and Freddie, relying instead on the private market.

"My goal is to get the taxpayer off the dime," Hensarling said at an event on Capitol Hill sponsored by the American Enterprise Institute, a conservative think tank. "We have got to have a housing-finance system that takes the taxpayer out of it."

Hensarling said he would be "open" to hearing arguments for a longer time frame but believes the end of Fannie and Freddie can realistically be accomplished within five years.

He later told reporters that "right now I believe five years is the right time. It's not an an arbitrary figure, it was done in consultation with a lot of people in industry, with a lot of scholars."

He added: "I'm always open to having my discretion informed by others...anybody who wants to come and try to make their case, we'll try and listen."

The American Enterprise Institute is trying to slam the brakes on any effort to replace Fannie Mae and Freddie Mac with new private companies that could issue government-guaranteed mortgage securities.

In a paper released Thursday, AEI scholars argue that any system created with guarantees is bound to fail because the government won't charge for insurance protection properly.

The study challenges a series of white papers by industry groups and other academics that have called for the government to issue mortgage-backed securities with an explicit guarantee, requiring banks to pay for that insurance protection.

"It is possible to have a housing finance system that does not involve any kind of government guarantee," said Peter Wallison, a senior fellow at AEI and one of the report's three authors. "That, in fact, is the way that most countries do it."

The paper calls for the government to gradually reduce the role that Fannie and Freddie play in the mortgage market so that role is ultimately taken on by the private sector. The government could do that, for example, by reducing the size of the loans that the companies are eligible to buy.

The Obama administration is due to issue its own overhaul proposal later this month.

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