GOP Boosts Drive to Kill Fannie Mae, Freddie Mac

WASHINGTON (AP) — Senate Republicans introduced legislation Thursday that would quickly phase out government-run housing giants Fannie Mae and Freddie Mac as GOP lawmakers on both sides of the Capitol intensified their drive to shrink the federal role in the mortgage market.

Sens. John McCain, R-Ariz., and Orrin Hatch, R-Utah, unveiled a bill that within five years would dismantle Fannie and Freddie or cut them loose as completely private entities. In the meantime, it would force them to take steps like charging higher fees and shrinking the size of their mortgage portfolios in hopes of opening up more of the mortgage market to private banks.

On the brink of collapse in September 2008 under the weight of the nation's housing crisis, Fannie and Freddie were taken over by the government, which has so far spent $150 billion to keep them afloat. The Obama administration and most Democrats agree that the two companies need to be wound down, yet many Republicans would do it faster and leave little or no federal role in the mortgage market, and the GOP has blended the issue into its overall drive to shrink government.

"Never again can we allow the taxpayer to be responsible for poorly managed financial entities who gambled away billions of dollars," said McCain, who made the near-collapse of the two housing finance companies an issue in his failed 2008 presidential campaign. "Fannie and Freddie are synonymous with mismanagement and waste."

Fannie and Freddie don't sell mortgages to consumers. They help supply cash to the mortgage market by buying mortgages from lenders and packaging mortgages into securities that they then sell to investors.

McCain's bill is identical to one introduced in the House in mid-March by Rep. Jeb Hensarling, R-Texas.