Treasury official: Recapitalizing GSEs would take 20 years

|By:, SA News Editor

“Even if truly rehabilitating the GSEs were possible, recapitalizing them adequately would take at least twenty years,” says Mary Miller, Treasury's undersecretary for domestic finance. “During these 20 years, the taxpayer would remain at risk of having to bailout the GSEs during another downturn."

Calling the current system - where the majority of housing credit is backstopped by taxpayers - "unacceptable" and "an unsound business model," Miller reiterates the administration's position that Fannie (FNMA -1.4%) and Freddie (FMCC -1.9%) be wound down. "Only legislation can protect taxpayers by responsibly winding down the GSEs and replacing them with a system where a government guarantee is transparent and explicitly priced.”