Treasury Secretary Timothy Geithner said Tuesday that the failures at Fannie Mae and Freddie Mac were "avoidable" and that lawmakers must forge a bipartisan overhaul of the housing finance giants.
Congress and the Obama administration are at the beginnning of a debate on how to rewrite the housing finance system, with Geithner saying there is "no clear consensus" yet on how to reform Fannie and Freddie. The two mortgage finance giants were bailed out by taxpayers in 2008 after suffering massive losses as the housing market plummeted.
Once quasi-governmental entities, the companies received just under $150 billion in federal taxpayer aid. The housing agencies and other federal efforts now guarantee roughly 90 percent of all mortgages. The housing market continues to struggle with mounting foreclosures weighing down the broader U.S. economic recovery.
"To be clear, the government's footprint in the housing market needs to be smaller than it is today," said Shaun Donovan, secretary of the Department of Housing and Urban Development.
The comments came at the beginning of a daylong conference on how to revamp the multitrillion-dollar housing market.
"These failures in our housing finance system were avoidable," Geithner said. "And it is our responsibility to make sure that we create a system that is not vulnerable to these same failures happening again."
Geithner said that the worst losses at Fannie and Freddie are due to mortgages guaranteed before the companies were taken over by the government. He urged a bipartisan rewrite of the finance system.
Republicans criticized the Obama administration for more than a year for not including changes to Fannie and Freddie in the overhaul of financial regulations that was enacted in July.
"The failures that produced the system we have today were bipartisan. The solution must be as well. This is a test for Washington," Geithner said. "The stakes are high. For many Americans, their home is their largest financial asset, and the housing industry supports millions of jobs."