US Federal Reserve Chairman says backing of GSE debt must be maintained
Federal Reserve Chairman Ben Bernanke said on Friday it is appropriate to debate the future of mortgage finance firms Fannie Mae and Freddie Mac, but U.S. backing for debt they issue in their current form must stay firm, Reuters reports.
"Even if alternative organizational structures are considered for the future, the U.S. government's strong and effective guarantee of the obligations issued under the current GSE (government-sponsored enterprise) structure must be maintained," he told a public policy symposium by videoconference.
The U.S. government took over Fannie Mae and Freddie Mac in September as the companies finances foundered.
Bernanke said that some form of government backing for bundling mortgages together as securities is probably still needed in times of financial strain.
"Experience suggests that, at least under the most stressed conditions, some form of government backstop may be necessary to ensure continued securitization of mortgages," he said.