President Barack Obama on Tuesday officially launched his campaign to transfer most of the risk currently undertaken by Fannie Mae and Freddie Mac to the private sector, saying during a speech in Arizona that the U.S. government should phase out the mortgage finance giants as part of an effort to prevent another taxpayer-funded bailout.
Arriving in Phoenix five years after the financial crisis that led to a $188 billion government bailout of Fannie and Freddie, Obama said that he is laying "a rock-solid foundation to make sure the kind of crisis we just went through never happens again." Private lenders—not the government—should stand as "the backbone" of the U.S. mortgage market. Fannie and Freddie currently buy and guarantee mortgages from banks, which use the government-sponsored enterprises to engage in more lending.
"For too long, these companies were allowed to make huge profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag," Obama said. "It was 'heads we win, tails you lose.' And it was wrong."