Big questions on Fannie-Freddie unanswered

By Kevin Drawbaugh - Analysis

WASHINGTON (Reuters) - The U.S. government's stunning takeover of Fannie Mae and Freddie Mac saves the mortgage giants' lives, but fails to determine what they will look like once they unplug from life support.

The job of rehabilitating the nation's largest housing finance companies will fall to the next Congress and the next president, whether it's Democrat Barack Obama or Republican John McCain, analysts and academics said on Monday.

Hours after Fannie Mae and Freddie Mac were placed under federal conservatorship by Treasury Secretary Henry Paulson on Sunday, housing experts were predicting a struggle next year over the final fate of the government-sponsored enterprises, or GSEs.

"There doesn't seem to be an end-game in this ... It punts the ultimate question of what to do with the GSEs to the next administration and the next Congress," said Adam Levitin, associate professor at Georgetown University Law School.

U.S. Senate Banking Committee Chairman Christopher Dodd on Monday said he wants to bring Paulson before the committee this week to explain the takeover. Dodd predicted further trouble for the economy if the takeover kills Fannie and Freddie.

Acknowledging that some critics for years have wanted to shut down Fannie and Freddie, Dodd said, "If this is an ideological thrust to make it impossible for these institutions to exist, then further economic deterioration is predictable."

At least one thing is certain, as Dodd said: "A President Obama or a President McCain is going to have a mess dumped in their lap in the next 60 days."

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