Geithner says stop crying over Fannie's spilled milk

Says it's time to get to work.

Tim Geithner urged critics of Fannie Mae and Freddie Mac to stop bemoaning the companies' massive losses.

Instead, he said, they must join the administration's efforts to help fix the broken housing finance system.

The Treasury secretary made the comments Tuesday morning in opening the administration's conference on the future of housing finance. Fannie (FNMA) and Freddie (FMCC) have taken almost $150 billion in taxpayer support in the two years since they were nationalized, but Geithner urged participants at the conference to focus not on those losses -- which are, after all, already gone -- but on addressing the imbalances and skewed incentives that led the companies to the brink.

"There is nothing we can do to decrease the significant losses Fannie and Freddie incurred ahead of this crisis," Geithner said. "All we can do is to minimize the risk that they get worse."

Congressional Republicans have been critical of the administration's handling of the issue, saying the companies' $5 trillion in outstanding mortgage guarantees "represents a taxpayer risk of unparalleled proportions." The first paragraph of a recent Republican tip sheet on the issue included three sentences detailing the companies' losses.

But the Republicans' proposals for fixing the companies amount to little more than political slogans, such as "taxpayer protection," "restoring market discipline" and "encourage innovation and choice for consumers."

While those are all uplifting thoughts, they offer little substantive advice on how to deal with the current crisis, in which the government fears that another downturn in house prices could again destabilize the banking system, with devastating effect on a weak economic recovery.  

Geithner said the administration recognizes the problems in the current arrangement and will push for a system that eliminates the conflict between Fannie and Freddie's private investors and their amorphous public policy role.

"We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support," Geithner said in his opening remarks. "We will not support a return to the system where private gains are subsidized by taxpayer losses."