Federal Deposit Insurance Corp. Sheila Bair warned Friday against indefinite government control of Fannie Mae and Freddie Mac.
In a speech on housing policy, Bair said some government involvement in mortgage finance is "certainly justified."
But the crisis, which included the government's 2008 seizure of Fannie and Freddie to prevent their failures, proved "any such program must be much more definitive about where the financial obligation of taxpayers begins and ends," she said.
"In the case of the mortgage" government-sponsored enterprises, "there are a variety of options for making some of their functions governmental while putting others in private hands," Bair said in prepared remarks at Wharton School's International Housing Finance Program. "But what we cannot do is perpetuate their quasi-governmental status, which privatizes gains and socializes losses."
She said policymakers should address the government's role with the enterprises after financial regulatory reform is finished.
"After the financial reform package becomes law, GSE reform should rise to the top of the agenda," Bair said. "The goal must be to clarify once and for all which functions should be governmental, and which are strictly subject to the discipline of the marketplace."
