The Federal Reserve, in an unusual foray into housing policy, expressed alarm over the battered home market and called for more aggressive action from Congress and other policy makers.
The Fed thinks it might be better for Freddie Mac and Fannie Mae to take some losses than for them to limit lending by not buying up enough mortgages, The Wall Street Journal said.
The Journal that a 26-page paper that the Fed sent to top lawmakers on congressional banking committees warns that strict lending standards for home mortgages threaten to hold back the economy.
The New York Times summarized the white paper this way:
"1. There are no silver bullets.
2. It certainly would be helpful if Fannie Mae and Freddie Mac, which are controlled by the government, gave the health of the housing market greater priority than their own short-term financial condition."
The Federal Housing Finance Agency, which oversees Fannie and Freddie since the government took them over, is trying to limit losses since the two companies wound up holding bad loans.
The Journal quoted the Fed as saying, however, "Some actions that cause greater losses to be sustained by the [companies] in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery."
