WASHINGTON (The NYT) -- Too many conflicting goals make it all but impossible for the mortgage giants Fannie Mae and Freddie Mac to return to their earlier form, according to former executives of Fannie Mae and former regulators who tried to keep a watch on the companies.

They testified Friday during the third day of hearings by the Financial Crisis Inquiry Commission into the role of subprime lending in the crisis.
The structure of the companies, known as government-sponsored enterprises, or G.S.E.’s, required them to “maintain a fine balance between financial goals and what we called mission goals,” said Daniel H. Mudd, who served as chief executive of Fannie Mae from June 2005 until the federal government seized control of the company in September 2008.
That led to conflicts between pursuing profitability and public policy, between paying competitive salaries and not wasting taxpayer money, and between choosing loosened financial constraints or tough regulation.
“On one hand,” he continued, “without revenue and profits and growth, the company could not attract global capital to the U.S. housing market, and on the other hand, without meeting the mission goals for affordable housing and liquidity, the G.S.E.’s could not meet the requirements of their Congressional charter.”
Similar sentiment was expressed by James B. Lockhart, who directed the Office of Federal Housing Enterprise Oversight, which regulated Fannie Mae and Freddie Mac, beginning in May 2006. He concurred with the suggestions by commission members that heavy spending on lobbying by the mortgage companies allowed them to head off most Congressional attempts to raise their capital requirements.
“The G.S.E.’s’ structure allowed them to be so politically strong that they resisted the very legislation that might have saved them,” Mr. Lockhart said.
While the Senate is likely to begin debate on a financial reform bill soon and the House has already approved one, a revamping of Fannie Mae and Freddie Mac is unlikely to be part of that legislation.
The two companies account for about 90 percent of all home loans being made, meaning that it is hard to conceive of the government not having a role in the home finance market. The Obama administration has said, however, that it wants to revamp the current system.
Mr. Mudd recommended one possible structure. “I would have the G.S.E.’s focused on principally first-time home buyers,” he said, giving them “fixed-rate 30-year loans with 20 percent down, the old-fashioned way.”
He added, however, the “notion that you would be able to go back to a fully private structure,” without government participation, “cannot be logistically accomplished in our lifetime.”