With the nation’s top two lenders deep in debt and losing money fast, President Obama made a decision to try to turn the mortgage giants’ fortunes around quickly.
On Friday Nov. 12, President Obama tapped North Carolina top bank regulator Joseph A. Smith to head up both Fannie Mae and Freddie Mac, which will put him in the middle of a potential firestorm as the newly elected Congress takes on possible restructuring of the two lenders next year.
Smith will have to be confirmed by the full Senate, and will then be director of the Federal Housing Finance Agency, which currently oversees 12 Federal Home Loan banks.
Traditionally, both Fannie Mae and Freddie Mac have played major roles in the housing market, by buying mortgages from lenders and then packaging them into mortgage-backed securities for third party investors. With the housing collapse of 2007, they were particularly hit hard by the fallout, and have both been bleeding money ever since.
The Treasury Department has poured $135 billion into the two lenders since they were taken over by the federal government, and when the new Congress convenes next year, lawmakers will decide whether the two agencies will continue to be backed by the government, or to be privatized entirely.
Should Smith be confirmed, it will his responsibility to carry out whatever changes Congress decides upon.
In comments about his nomination, President Obama said, “Mr. Smith brings to this position both tremendous expertise and a deep commitment to strengthening our housing finance system for the American people. I’m grateful that he has accepted this nomination, and I look forward to working with him in the months and years to come.”
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UPDATE: http://aomid.com/fannie-mae-freddie-mac-get-new-head/224353/ Nov 13 2010