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Obama: Fannie Mae and Freddie Mac not government, not private

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Staff writer ▼ | August 8, 2013
President Barack ObamaPresident Barack Obama said it is time to reduce the federal role and risk in the mortgage market "to make sure the kind of crisis we went through never happens again" and proposed to wind down Fannie Mae and Freddie Mac.

The companies, which President Obama described as "not really government, but not really private sector," recently began to repay taxpayers.

"For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag. It was 'heads we win, tails you lose," said Mr. Obama.

President Obama endorsed the thrust of bipartisan legislation from a Senate group that would "end Fannie and Freddie as we know them." The government-sponsored enterprises for decades bought and sold mortgages from financial institutions to provide money for the banks to keep lending to home buyers.

Under Mr. Obama's principles, Fannie Mae and Freddie Mac would further shrink their portfolios and lose the implicit guarantee of a federal government bailout. Instead, private investors would be most at risk, with the government a secondary guarantor.

"First, private capital should take a bigger role in the mortgage markets. I know that sounds confusing to folks who call me a socialist. I believe that our housing system should operate where there's a limited government role and private lending should be the backbone of the housing market," said Mr. Obama.

The president said that any measure he signed into law "should preserve access to safe and simple mortgage products like the 30-year, fixed-rate mortgage. That's something families should be able to rely on when they're making the most important purchase of their lives."

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