* Bachus: end bailouts of Fannie, Freddie
* Election results show voters favor private market-Bachus
* Bank tax won't resurface in Republican House-Bachus
* Push to legalize online gambling dead for now-Bachus
(Adds Bachus, Abrahams, Shaw-Petrou comments, byline)
WASHINGTON, Nov 3 (Reuters) - The next head of a key U.S. congressional committee overseeing banks and housing finance told Reuters on Wednesday that mortgage giants Fannie Mae and Freddie Mac should be in liquidation, not conservatorship.
With Republicans capturing control of the House of Representatives in Tuesday's elections, Spencer Bachus is expected to take over the chairmanship of the House Financial Services Committee, replacing Democrat Barney Frank.
In an interview, Bachus put reforming Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) at the top of his priorities list. He will face an uphill climb against Senate Democrats and the Obama administration, who still see a role for government involvement in the mortgage market.
Fannie Mae and Freddie Mac, known as government-sponsored enterprises, or GSEs, were seized by the government at the height of the 2007-2009 financial crisis and are now under direct government management. "They're in a conservatorship and they really ought to be in a liquidation," Bachus said.
A top objective for the committee under his leadership will be "ending the bailout of Fannie and Freddie," he said.
"The Democrats haven't addressed the need for a long-term plan to transition into a private market," said the Alabama lawmaker, adding that he sees Tuesday's election results as a sign that voters favor privatizing housing finance, as well.
His comments came as Freddie Mac reported a $4.1 billion third-quarter net loss and sought more funding from the U.S. Treasury Department to maintain positive net worth. [ID:nN03285333]
Fannie Mae's quarterly results are expected in a few days.
Congress approved sweeping reforms for Wall Street and the banks in July, but they did not address the future of the GSEs, which today guarantee 80 percent of new mortgages. The GSEs have soaked up $148 billion in bailout money and taxpayers could be on the hook for $215 billion more by 2013.
The Obama administration has called for "fundamental change" at Fannie and Freddie, and is due to provide its draft housing overhaul plan by January.
CONSENSUS THAT OVERHAUL NEEDED
Both Democrats and Republicans agree that an overhaul is needed, but they differ in some fundamental approaches.
The Obama administration has made clear that it supports preserving a role for the government in guaranteeing mortgages. Most Democrats in Congress would agree with that, and some Republicans would as well, policy analysts said.
Many of the Republicans who are taking over the financial services committee want more dramatic changes, but their path is likely to be blocked by Democrats, who retained control of the Senate on Tuesday, and President Barack Obama's veto pen.
"We need to end additional guarantees. The guarantees that are in place we should honor, but long-term we need to return to a private market," Bachus said.
"We'll put it to the Senate as to whether they believe that a government-run mortgage market or a privately centered mortgage market is the best option. I know what the American people believe and I think the Senate will be more amenable to privatizing (the GSEs) after last night."
Democratic Senator Tim Johnson, the presumptive incoming chairman of the Senate Banking Committee, told Reuters on Friday that GSE reform is high on his to-do list, as well.
"Republican efforts to limit both the range of loans and the government risk will probably push the debate into 2012, where presidential politics will shut it down," said Deutsche Bank mortgage strategist Steven Abrahams.
FISCAL IMPACT SEEN PIVOTAL
With Congress increasingly focused on the federal budget deficit, a key test of any housing finance reform will be its fiscal policy impact, said Karen Shaw-Petrou, managing partner at Federal Financial Analytics.
"If it costs federal dollars, it isn't going to happen. If it reduces the deficit ... it's a winner," she said.
"Straight-forward privatization will be hard to accomplish despite the strong initial push through the House. But privatization combined with a federal catastrophic-risk backstop that makes money -- at least on paper -- is a high-odds prospect."
Bachus also said in the interview that a proposed bank tax will not be revived by House Republicans. The administration earlier this year called for a "crisis responsibility fee" on banks with assets exceeding $50 billion to collect about $90 billion over 10 years to recoup bank bailout costs.
"There's not going to be any bank tax ... We're not going to bring it up for a vote," Bachus said.
Bachus also said Frank's effort to legalize online gambling, effectively banned in the United States in 2006, is dead for now. "If a local community wants to allow gambling, that ought to be their decision," Bachus said.
"Congress should not pass any law like Barney Frank intended to basically open a casino in every dorm room or bedroom," Bachus said.
Internet gambling companies "have spent millions of dollars lobbying against me becoming chairman," he said. "That's no secret."
(Additional reporting by Al Yoon in New York; Editing by Tim Dobbyn)
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