White House Weighs 'Bad Bank' Fix for Fannie, Freddie

By Kevin Spak,  Newser Staff
Posted Aug 6, 2009 8:40 AM CDT
White House Weighs 'Bad Bank' Fix for Fannie, Freddie
In this May 2, 2007 file photo, the Fannie Mae building in Washington is seen.   (AP Photo/Manuel Balce Ceneta, File)

(Newser) – The White House’s National Economic Council will meet today to discuss a drastic overhaul of beleaguered nationalized mortgage dealers Fannie Mae and Freddie Mac, the Washington Post reports. Among other proposals, officials are contemplating a “good bank, bad bank” split. Fannie and Freddie would dump their troubled loans on a new, government-created company that would work to collect the outstanding balances, giving the mortgage giants a clean slate.

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“It should come as no surprise that the administration is thinking through” drastic changes to the companies, a Treasury spokesman said. In an interview yesterday, the top regulator of Fannie and Freddie said the "bad bank" solution was necessary. Officials will also discuss whether to merge the “good banks” into one government agency, or return to a hybrid public/private model. (Read more Fannie Mae stories.)

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