No quick fix for Fannie, Freddie seen from meeting

The Obama administration will pick the brains of housing finance leaders on how to fix Fannie Mae and Freddie Mac, but made one thing clear on Tuesday: there is no going back to their pre-crisis structure.
Treasury Secretary Timothy Geithner, in excerpts of remarks to be delivered at a Treasury conference on restructuring the two government-controlled mortgage finance giants, called that task one of the most "consequential and complicated" problems facing the United States.
"We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support," Geithner said. "We will not support a return to the system where private gains are subsidized by taxpayer losses."
The conference, to feature some of the mortgage sector's top lenders and investors, is billed as a "listening session" as the administration gathers ideas to develop an overhaul plan by January. No major changes are expected before 2011.
Fannie Mae and Freddie Mac have received nearly $150 bln in taxpayer bailout money since they were seized by the Bush administration in 2008 to save them from collapse. Their problems and costs were not addressed in the Wall Street reform law passed in July.
The problems won't be solved anytime soon, analysts say, with Congress focused on elections in November, federal spending coffers largely depleted and nerves on edge about making changes that could trigger another housing market crash.
Bank and mortgage-backed securities investors are watching warily as the administration weighs options, ranging from full nationalization at one extreme to privatization with no government support at the other, and a wide range of alternatives in between.
Geithner has said there is a "good case" for the government to stay involved in housing finance. But he and other officials have been careful not to say much more than that,
"If we decide we want to subsidize the housing sector, we are going to need to decide to do that explicitly, and people are going to have to pay for it … That would be a fundamental change," Michael Barr, the Treasury Department's assistant secretary for financial institutions, said last week.
Geithner said the government needed to more clearly delineate its housing policy goals, separating efforts to provide affordable mortgages to most Americans from efforts to provide affordable housing for low-income Americans.
Fannie and Freddie both jumped into subprime mortgages during the housing boom in the early 2000s in an attempt to broaden home ownership — with disastrous results.
Participants will include executives from Wells Fargo and Bank of America, as well as Bill Gross, the co-founder of bond-trading firm Pacific Investment Management Co,, and Lewis Ranieri, who helped develop the model for the private mortgage-backed securities market that was central to the housing bubble that burst in 2007-2008.
The conference occurs a day after U.S. homebuilder sentiment unexpectedly fell for a third straight month in August to its lowest level in nearly 1-1/2 years, according to a survey that added to evidence of slowing economic recovery.