Mortgage giants Fannie Mae and Freddie Mac played key roles in the housing market meltdown just a few years ago. President Barack Obama has proposed dissolving the two companies. Some Republican leaders have praised the plan. What's not to like?
Not so fast. Indeed, Fannie Mae and Freddie Mac, through incredible mismanagement, helped bring on the current recession. But their roles in the mortgage loan system are so gigantic and basic that simply eliminating them without ensuring an adequate replacement is ready would be imprudent.
About half the home mortgages in the United States are either owned or guaranteed by Fannie Mae or Freddie Mac. They and other federal agencies played some part in issuance of as many as 90 percent of the mortgages issued during the past year.
Obviously, the two companies cannot be wiped out with the stroke of a pen. Doing away with them - while clearly a good idea - needs to be a slow phase-out as some mechanism of handling what they do now is put in place.
Again, Republican leaders in Congress seem to like Obama's proposal. But all involved need to take a very close look at the Obama plan to ensure it does not replace two evils with what might amount to anarchy in the mortgage industry.
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