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Fannie, Freddie Reform Plan Pushed Back

WASHINGTON ( TheStreet) -- The federal government has again extended the horizon for meaningful reform of Fannie Mae (FNM) and Freddie Mac's (FRE) business model, another sign that the firms are too interwoven with current policy to change the status quo and that their problems are too complex to resolve overnight.

Appearing before the House Budget Committee on Wednesday, Treasury Secretary Timothy Geithner said the plan for Fannie and Freddie will not be outlined until 2011. The government will release a set of "principles and broad objectives" sometime this year, according to Geithner, which will be open for public comment.

In late December, the Obama administration said it expected to unveil a Fannie-Freddie strategy as part of the 2011 budget. But the White House subsequently backed off that plan, releasing a budget proposal on Feb. 1 with no mention of mortgage-finance reform.

Some Republican lawmakers have been critical of the delay, which has offered both political opponents and the private industry a chance to put forward their own ideas of reform. Still, there appears to be no consensus on the best path forward and Geithner predicted that the Fannie-Freddie plan will be "a difficult set of reforms" to push through Congress, whose partisan fever has deadlocked other important bills in recent months.

Some liberal lawmakers, including House Financial Services Committee Chairman Barney Frank (D., Ma.), seem to favor a plan that keeps the government deeply involved in housing, and supportive of affordable housing for low-income families. Some conservatives would rather do away with Fannie and Freddie altogether, and let the private market take care of mortgage financing on its own, without a government guarantee.

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