Fannie and Freddie on the Chopping Block? (FNM, FRE)

Could Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) be shut down?  If Barney Frank gets his way, you bet they can.  Both FNM and FRE are having a tough day, down 6%+ as sellers run for the exits.

Jan. 22 (Bloomberg) -- Representative Barney Frank, whose committee oversees Fannie Mae and Freddie Mac, said he will push to do away with the companies in favor of a different model for U.S. mortgage financing.

“The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance,” Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said at a hearing in Washington today. “That’s the approach, rather than a piecemeal one.”

The companies, the largest sources of money for U.S. home loans, were seized by regulators almost 17 months ago because of their risk of failing and have since survived on $110.6 billion in taxpayer-funded aid. Frank said Congress also needs to figure out what to do with the remaining shareholders in Fannie Mae and Freddie Mac as well as investors in the companies’ $5.4 trillion in mortgage bonds and $1.7 trillion in unsecured corporate debt.

SOURCE: http://www.bloomberg.com/apps/news?pid=20601110&sid=aJN1KD4mKeLc