by Calculated Risk on 2/08/2011 09:41:00 PM

From Binyamin Appelbaum at the NY Times: Plans Near for Freddie and Fannie

[The] report will be released as early as Friday, [and] will present a range of options without stating a preference.
...
One possibility ... would not create any federal replacement for Fannie and Freddie, leaving the private markets to provide mortgages for most Americans. The alternative approaches instead would continue some form of federal mortgage backstop.
...
One potential compromise described in current drafts of the administration’s proposal would reduce the government’s role to a last line of defense for the mortgage market. ... During normal times, the insurer would guarantee no more than 10 percent of mortgages, but in times of crisis, the government could raise that cap, offering guarantees to a broader range of investors so that money continues to flow into the mortgage market and credit remains available.

At the least, having Fannie and Freddie as the "last line of defense" seems to make sense. When the next crisis happens - and it will happen - if there is only a "private market", then the government would have to scramble to provide mortgages (a free fall would never be allowed), so you might as well plan for it in advance.