"It is not tenable to leave in place the system we have today." So said Timothy Geithner at the much-ballyhooed conference hosted by the Treasury Department.

But at the same time, there is no immediate urgency to fix the government-sponsored enterprises. Along with the Ginnie Mae and the FHA, they back up to 90 percent of all retail mortgage loans. The big two also remain on life support, having accepted about $150 billion in taxpayer money.

The question here is how to fix these guys, and it just might emerge as a campaign issue at some point. Much of the debate is indeed political. Should the government play any role in real estate finance? Should it merely play a role aimed at reducing costs for lower-income borrowers? Should it be fully nationalized? These are big perennial issues that could easily find expression in the debate over Fannie and Freddie as political campaigns heat up.

In the end, we'll likely get something of a compromise. We may end up right back in the same system: These two entities may go back to buying up mortgages, packaging them and re-selling them to Wall Street. The only difference might be the terms and size of conforming loans. We may wind up with a scaled back version of what we have now, instead of an entirely new system.

For more:
- here's a Reuters article

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