Thursday, August 6, 2009

70 Year Old Couple To Get a Makeover

The White House's National Economic Council will spend today beginning work on a long overdue plan to reform Fannie Mae and Freddie Mac, the giant government sponsored enterprises (GSEs) which own trillions of dollars worth of existing home mortgages.

One proposal on the table would use the "good bank, bad bank"  methodology to split the GSE's mortgage portfolios into one pile that's performing, and another pile of toxic assets overseen by the US government.

The bad debts the firms own would be placed in new government-backed financial institutions -- so-called bad banks -- that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate. (Zachary A Goldfarb & David Cho of the Washington Post, August 6, 2009)

Because Fannie & Freddie (whom I affectionately call The Two Fs) will be big news for a few days, here's a linkback to our short review of who's who and what's happened.