WASHINGTON (CNN) - Things got heated Sunday morning on CNN’s Late Edition over the question of whether taxpayers have to bail out the government-sponsored mortgage lenders Fannie Mae and Freddie Mac.
“If they're in deep trouble, [should] U.S. taxpayers go out and bail them out?” host Wolf Blitzer asked Senator Jon Kyl, R-Arizona, a member of the Senate Finance Committee who was on the program with Senate Banking Committee Chairman Chris Dodd, D-Connecticut. Dodd jumped in to respond himself.
“To suggest somehow that [Fannie Mae and Freddie Mac] are in trouble is simply not accurate,” Dodd replied.
Last week shares of the two mortgage giants plummeted as speculators grew increasingly nervous that Fannie and Freddie would not be able to guarantee the $5 trillion debt they hold in mortgages. Dodd’S committee oversees Fannie Mae and Freddie Mac.
“The facts are that Fannie and Freddie are in sound situations,” Dodd said. “They have more that adequate capital, in fact more than the law requires.”
When pressed about the recent IndyMac Bank federal takeover, Dodd said that could have been avoided if there had been proper regulations in place to monitor the sub-prime mortgage market.
IndyMac closed on Friday after federal regulators realized that the bank was no longer capable of guaranteeing deposits. The bank was also a large issuer of sub-prime mortgages.
Kyl said Americans should not fear the money they have in banks is at risk. But he added that the Fannie Mae and Freddie Mac situation is “of serious concern… They really are barely staying above water.”