BY NOW, the Obama administration was supposed to have a plan to reform Fannie Mae and Freddie Mac, the "government-sponsored" mortgage finance enterprises (GSEs) that have been under federal control -- and absorbing $126 billion in federal cash -- for the past 19 months.
But last week Treasury Secretary Timothy F. Geithner told the House Financial Services Committee that all he can promise is a "public comment" period starting April 15, in which the various housing interest groups -- and there are a lot of them -- can submit their ideas. Thereafter, at an unspecified "time of greater market stability," legislation can be drafted, introduced and passed.
In short, after a year of discussion, Mr. Geithner promises more discussion.
To be sure, there are reasons for this delay. The political system, already overtaxed by the health-care debate and a looming battle over regulatory reform, might not be able to handle another partisan war. Housing remains fragile, with a huge "shadow inventory" of soon-to-be foreclosed properties poised to flood the market and not nearly enough private capital available to take the place of Fannie and Freddie's limitless credit line with the Treasury.
Still, there is no shortage of good ideas for restructuring Fannie and Freddie, and it's not clear that a few more months of debate will produce any brilliant discoveries. Presumably, everyone now recognizes that the old "government-sponsored" model encouraged excessive risk-taking, with private parties reaping the gains and taxpayers stuck with the losses.
The new model must abolish this fatal confusion. The country can probably get away with waiting until 2011 to do that, but not much longer. The worst possible outcome would be that housing lobbies succeed in using Mr. Geithner's "comment" period to limit the scope of reform.
In that sense, Mr. Geithner's testimony last week was useful, because it endorsed some hard truths about Fannie and Freddie -- and the reasons for their failure -- that past Congresses and administrations have been loath to concede. Among these: that "a significant amount" of the enterprises' large, implicit subsidy was not passed along to homeowners as advertised "but instead benefited GSE shareholders, managers, mortgage originators and other stakeholders."
Also, Mr. Geithner acknowledged, the GSEs' "aggressive lobbying" helped them to thwart serious oversight or reasonable capital requirements. Looking ahead, Mr. Geithner argued -- correctly -- that goals for affordable housing must be pursued through agencies specifically devoted to them, and not "commingled" with the broader purposes of mortgage finance. "The housing finance system cannot continue to operate as it has in the past," he said. Right again.