Republicans Soften Talk on Fannie, Freddie

Earlier this year, leading House Republicans proposed to privatize mortgage giants Fannie Mae and Freddie Mac or place them in receivership starting in two years, The Wall Street Journal reported Wednesday.

Now, as Republicans prepare to assume control of the House next week, they are not in as big a rush, cautioning that withdrawing government support in the housing market should be gradual.

"We recognize that some things can be done overnight, and other things can't be," said Rep. Scott Garrett (R-NJ), incoming chairman of the House Financial Services subcommittee, which oversees Fannie and Freddie. "You have to recognize what the impact would be on the fragile housing market as it stands right now."

Fannie and Freddie, which buy mortgages from lenders and package them into securities that it sells to investors, were placed into government conservatorship in September 2008 after they nearly failed as losses from the housing bust started to mount.

Keeping them afloat so far cost taxpayers about $134 billion, and the companies' federal regulator estimated it could cost about $20 billion more.

By comparison, the broader Troubled Asset Relief Program, which bailed out the rest of the financial industry, was projected to cost $25 billion.

Cautious statements from key Republican members of the House Financial Services Committee indicated a shift from the debate over the Dodd-Frank financial overhaul last spring and summer, when Republicans blasted the Obama administration for omitting Fannie and Freddie from the bill.Republicans were backing a bill by Rep. Jeb Hensarling (R-Tex.) to start 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.

Many Republicans now concede that a speedy exit may not be practical, because Fannie Mae and Freddie Mac have such a dominant position in the nation's housing market.

Garrett said he has "not established a specific timeframe for winding them down."