White House Delays Fannie & Freddie Reform

Home Finance: Fannie and Freddie are still bleeding losses, costing taxpayers billions more each month. Yet the White House continues to delay reforms, in defiance of a congressional order.

On Monday, the White House was to deliver a report to Congress proposing fixes to the government-sponsored mortgage giants at the center of the financial crisis. It was under statutory requirement to make that Jan. 31 deadline. But it blew it.

The White House claims it was busy with the State of the Union and needs more time to put together a report. Look for it sometime in February, it now says.

But this marks the third time the administration has missed a deadline for dealing with the fate of the federally chartered toxic twins, which ended up holding almost half the subprime and other risky loans that sank the housing sector. It's plain the administration is stalling.

The delay is further proof that Fannie and Freddie reform is not on the legislative calendar for this year or even 2012. Which means the same agencies responsible for collapsing the housing market are still running the housing market - and will for some time.

Worse, they're now operating under full control of the government, which has lifted the $400 billion bailout cap from what it thinks will be necessary to keep Fannie and Freddie afloat. Taxpayer liability, in effect, is unlimited. This is insane given new evidence that Fannie and Freddie were not, as the administration has claimed, driven into the subprime market by profits. They clearly were driven there by their "affordable housing mission" regulator.

HUD enforces their social lending. Starting in 2000, the agency required 50% of their mortgage purchases had to be affordable-housing loans to poor and minority borrowers, who typically pose greater credit risks. For every mortgage they bought that was not goal-qualifying in the prime market, they had to acquire a goal-qualifying loan in the subprime or other nonprime market.

HUD's social-lending quotas remained in effect through the crisis. The agency actually boasted in one report that its goals were responsible for higher subprime volume at Fannie and Freddie.

Now that those subprime loans have defaulted, Washington acts as if the entities holding them are too big to fail. After escaping "the most sweeping financial reforms since the Great Depression," Fannie and Freddie remain unscathed.

As failed social experiments, Fannie and Freddie shouldn't even be reformed. They should be abolished. And government should just get out of the mortgage business; it's done enough damage.