By Kasra Kangarloo

WASHINGTON (MNI) – The U.S. Treasury Department is still working
toward a set of legislative options for winding down mortgage giants
Fannie Mae and Freddie Mac that could gain traction with Congress,
Treasury Secretary Timothy Geithner said Wednesday.

“We’re getting closer to being able to work with Congress on
something that might pass legislation,” Geithner said in response to a
question from Rep. Jo Emerson during a hearing by the House Committee on
Appropriations.

“We’re hoping to be in a position relatively soon to engage
congress more substantively,” he said.

Geithner could not provide a specific time frame for the Treasury
Department’s presentation of final proposal for winding down the
agencies, but said the department is still consulting members of
Congress, as well as real estate and finance industry representatives,
on a range of choices.

The Obama administration first proposed its intention to wind down
Fannie Mae and Freddie Mac in February 2011 as part of a larger plan for
reforming the federal government’s role in the housing market.

Geithner also said that the administration is working with the
Federal Housing Finance Authority to provide principle reductions for a
greater number of mortgages, adding that the agency had been “hesitant”
to provide such aid.

“We’re encouraging [the FHFA] to look at this again because we
think there’s a good economic case for doing write-downs in some cases,”
Geithner said.

Regarding China, Geithner said that the administration will
continue to push the Chinese government on allowing the value of the
yuan to rise.

Geithner also urged members of the committee to focus on deficit
reduction only in the context of improving economic growth, particularly
in terms of spending cuts to discretionary government spending.

“The economy, healing from a crisis, would be very damaged if you
tried to cut deficits too quickly,” Geithner said.

He also reiterated that new sources of revenues — including new
taxes on the wealthiest Americans — must be included in any realistic
deficit-reduction strategy.

“We don’t see how we can solve this problem without a modest amount
of additional revenue through tax reform on the most fortunate
Americans,” Geithner said.

Asked when the next vote will be needed to raise the debt ceiling,
Geithner said that it would probably not be necessary until after the
election, but before the end of 2012.

Geithner chastised the committee several times during the hearing
over the political stand-off that took place before the debt ceiling was
raised in August last year and cautioned that it should not be repeated.

“Don’t play politics with this again, because it will be terribly
damaging to the country,” Geithner said. “It is a completely
unacceptable way to run the country.”

–Kasra Kangarloo is a reporter for Need to Know News in Washington

** MNI Washington Bureau: 202-371-2121 **

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