Tuesday is the day for the Treasury Department's conference on "The Future of Housing Finance." At the center of the debate lie Fannie Mae and Freddie Mac, which remain on the federal dole while the housing-market struggles to recover. What is the best way to help the market while correcting the problems that led to the crash?

  • Kill Affordable Housing Mandates, writes Edward Pinto, former chief credit officer at Fannie Mae, in The Wall Street Journal. The "bargain" at which policymakers are arriving involves "an explicit federal guarantee of a large portion of the mortgage-backed securities; a tax on these securities to fund low-income housing initiatives; and a requirement that issuers of securities meet affordable housing mandates." The problem, though, argues Pinto, is that "the federal affordable housing policy"actually played a "central role" in the crisis to begin with:

How should we go about repairing this dysfunctional housing finance system? The goals should be larger down payments, stricter underwriting standards, reliance on the private sector and private capital, and the removal of affordable housing mandates. If there is to be an affordable housing policy, it should not be implemented by hidden subsidies and loose lending standards, but instead made transparent and funded on budget by the government.

  • Important to Re-Privatize  "Pushing the mortgage business into private hands is the best way to go," declares a Chicago Tribune editorial, but  "as a practical matter it will need to be done in stages." The first step should be to "eliminate once and for all the implicit government guarantee that allowed Fannie and Freddie to accumulate huge losses at taxpayer expense." The Tribune recognizes, though, that getting Fannie and Freddie back into the private sector will "take some doing: the private mortgage market is pretty much dead at the moment."
  • 'A Rough Time to Destabilize Housing,' comments The Washington Post's Ezra Klein. "Fannie and Freddie may be a bad foundation for our housing market, but they're still the foundation for our housing market." Fannie and Freddie, with Ginnie Mae, "backed 98 percent of mortgages this year" in the midst of a fragile economy.
  • And for What?  "There is no urgency," Representative Barney Frank tells Andrew Ross Sorkin, who uses the talk as the basis for his New York Times column. Fannie and Freddie have been taken over, but "money is not being lost by anything they are doing now." Writes Sorkin: 
As unsatisfying as it may sound, he's right ... The sinkhole that is Fannie and Freddie... is not a function of those firms making new loans that have gone bad, but the continued "bleeding," as Mr. Frank put it, from previous loans made before the crisis that are still going belly-up.

More important, shutting down Fannie and Freddie and having the private market step in, as politically popular a sound-bite as that may be, is economically unfeasible. For better or worse, Fannie, Freddie and Ginnie Mae were behind 98 percent of all mortgages in this country so far this year, according to the Mortgage Service News. Pulling the rug out from under them would be pulling the rug from under the entire housing market as it continues to struggle.