Fannie, Freddie Hold Plenty Off the Books

The budget proposal came and went on Monday with much ado about deficits, but no word on the fate of Fannie Mae and Freddie Mac.

"It is hugely disappointing," Sen. Bob Corker (R., Tenn.), said in a statement, later adding that ""throughout the debate on regulatory reform, the future of the mortgage markets in the United States has been off the table."

Corker has been a vocal critic of the government's handling of Fannie and Freddie -- or lack thereof -- and sent a request for information to the Treasury Department on Jan. 11. Rep. Barney Frank (D., Mass.), who chairs the House Financial Services Committee, said earlier this month that he and his colleagues would probably suggest abolishing its current status, but didn't give any suggestions for an alternate solution.

But as luck would have it, another group of regulators have stepped in to help Fannie and Freddie with their off-balance sheet dilemma. The Federal Reserve, Federal Deposit Insurance Corp. and two other banking regulators decided earlier this month that they would allow banking entities a grace period of two additional quarters to recognize assets off the books, and reserve capital against potential losses.

In the meantime, Fannie and Freddie are working diligently to figure out how to move and account for the huge swath of mortgage assets that once existed in the brume off their books.

"We have devoted significant effort to this project, which involves several divisions within our company, hundreds of employees and contractors and a tremendous amount of work across our company," Fannie said in its quarterly filling.

--Written by Lauren Tara LaCapra in New York.

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