Geithner: No change to Fannie, Freddie until 2011

WASHINGTON — The Obama administration will wait until 2011 to propose an overhaul of mortgage giants Fannie Mae and Freddie Mac, Treasury Secretary Timothy Geithner said this past week, arguing that he wanted to put some distance between a new system and what he called "the worst housing crisis in generations."

Geithner also told lawmakers the administration had no intention of including the two entities in the federal budget, even though they were taken over by the government in 2008 as they faced mounting losses from mortgage defaults.

Fannie Mae and Freddie Mac are vital players in the mortgage industry, purchasing home loans from lenders and selling them to investors. They own or guarantee about half of all residential mortgages. Had they gone broke in 2008, millions of people would have been unable to get mortgages.

The administration's Republican critics have argued that President Obama should have proposed sweeping changes to Fannie Mae and Freddie Mac last year, when he demanded an overhaul of financial regulations.

The administration had been expected to announce its plans this month when it submitted its 2011 budget request.

"We want to make sure that we are proposing these changes at a time when we have a little bit more distance from the worst housing crisis in generations," Geithner said.

But Congress may move faster on the future of the mortgage giants.

House Financial Services Chairman Barney Frank, D-Mass., plans a hearing within two weeks on their future.

And Federal Reserve Chairman Ben Bernanke, testifying before that committee on Wednesday, urged a swift response.

"The sooner you get some clarity about where the ultimate objective is, the better," he said.