The US should tread cautiously as it seeks to overhaul Fannie Mae (FNMAS) and Freddie Mac (FMCC), Tim Geithner, Treasury secretary, said on Tuesday, citing the need to maintain low mortgages rates in a tough housing market.

Speaking as host of a conference on reform of the loss making government-sponsored enterprises (GSEs), Mr. Geithner said it was important to “begin the process of weaning the markets away from government programs and make room for the private sector to get back in the business of providing mortgages”.

But he added: “We need to continue working to keep overall mortgage rates low. As we go through this transition, it is important that consumers maintain access to credit at attractive rates. The planned wind-down of the GSEs portfolios should be done in a careful way.”

Reform of Fannie Mae and Freddie Mac, which have incurred losses of about US$150B (€117B, £96B) for the US since being placed under government control in Y 2008, was left out of the massive financial regulatory overhaul bill enacted last month, but has since risen to the top of the economic and financial policy agenda.

The Obama administration is expected to propose its own reform plan in January, and Mr Geithner said there was a “strong case to be made for a carefully designed guarantee in a reformed system”. Without such support, “future recessions could be more severe”, with greater home price declines and damage to financial wealth.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Aug 17th, 2010and filed underEquities, Latest News, Markets, USA.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site