Reporting from Washington - It is the forgotten bailout: $125.9 billion spent by taxpayers so far to rescue housing giants Fannie Mae and Freddie Mac -- nearly twice what's been pumped into American International Group Inc. -- and with no end in sight.
But in a hearing Tuesday, lawmakers will start pressing the Obama administration for an exit strategy as the government faces an unlimited commitment for the next three years to the housing finance agencies, which are almost single-handedly keeping the fragile real estate market afloat.
"It's clear that Fannie and Freddie, as they currently exist, should be put out of existence, which means the important question is what combination of entities public and private will replace them," said Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee.
He has called Treasury Secretary Timothy F. Geithner to testify at the hearing before his committee about how to do that.
But with a full legislative agenda and concerns about a struggling housing recovery, the Obama administration is not eager to get started on the difficult and complex task of remaking, or replacing, Fannie and Freddie. The companies, seized by the government during the credit crisis in 2008, hold or guarantee a total of about $5 trillion in mortgages.
Administration officials had promised last year they would offer a plan in February. Now Geithner has said that a detailed plan won't come until next year. Lawmakers from both parties do not want to wait.
For months, Republicans have been hammering the administration for failing to include an overhaul of Fannie Mae and Freddie Mac as part of its reform of financial regulations.
They blame the former government-sponsored enterprises for fueling the demand for subprime mortgages to meet federally mandated affordable-housing goals.
Republicans also charge that Democrats ignored the mounting troubles at Fannie Mae and Freddie Mac because company executives were large political contributors.
Democrats dispute those allegations, noting that reforms failed to pass when Congress was under Republican control early last decade but were enacted after Democrats took the majority in 2007.
But those changes were not enough to save Fannie Mae and Freddie Mac. The companies, created by Congress but eventually turned into private firms, were placed under federal conservatorship amid huge losses from risky mortgages they owned or guaranteed during the housing boom.
Rep. Jeb Hensarling (R-Texas) introduced legislation last week to turn Fannie Mae and Freddie Mac again into privately held companies over five years.
"I believe it's time we quit bailing out Fannie and Freddie and we protect the taxpayers," said Hensarling, who said their rescue was shaping up to be "the mother of all bailouts."
"Unfortunately, not unlike the iceberg that took down the Titanic, this $125 billion is just the tip of the iceberg," he said.
Taxpayers now own 79.9% of Fannie Mae and Freddie Mac as part of a bailout that began in September 2008, with a Bush administration commitment to spend up to $100 billion on each to keep them afloat. The Obama administration increased that to $200 billion early last year.
In December, the Treasury Department announced there would be no cap until the end of 2012 on what could be spent to keep Fannie Mae and Freddie Mac out of bankruptcy, a move it said was designed to add stability to the housing market and safety for buyers of new mortgage-backed securities and those holding $1.6 trillion in old debts.
The government has helped keep mortgage rates low by purchasing up to $1.2 trillion in mortgage-backed securities from Fannie Mae and Freddie Mac.
The Federal Reserve has led that program by purchasing much of those securities. But the Fed has been phasing out its purchases and will stop March 31. Analysts expect interest rates to rise slightly as private investors seek a greater return before buying more of the securities.
Fed Chairman Ben S. Bernanke said last week he expected that Fannie Mae and Freddie Mac would be restructured.
"My assumption is that sometime soon -- I'd hope soon -- the Congress will reform Fannie and Freddie, perhaps break them up, perhaps make them officially governmental," Bernanke said.
But Fannie Mae and Freddie Mac still are playing a large role in housing finance because banks remain hesitant to lend, so there are strong economic and political reasons Congress and the Obama administration need to move slowly, said Jaret Seiberg, a financial policy analyst at Concept Capital's Washington Research Group.
"The first rule has to be to do no harm to the housing market, and it's difficult to fathom how, when credit is tight, you can restructure the primary drivers of home financing," he said. "You just can't risk upsetting the part of the housing financing system that is working."
Frank said that Fannie Mae and Freddie Mac are now "kind of public utilities to keep the housing market going."
Geithner is not expected to lay out a restructuring plan for Fannie Mae and Freddie Mac at the committee hearing. But he could talk about the principles and objectives for such a restructuring.
James Lockhart, the former director of the Federal Housing Finance Agency, which oversees Fannie and Freddie under the government's conservatorship, said it's too soon to make major changes to the housing entities. But he said it's not too soon to start talking about it.
"There's a lot of pressure on the mortgage system at the moment. That's one of the reasons we have to keep Fannie and Freddie in there," he said.
"I'm hopeful this year that Congress will start the dialogue . . . and hopefully by next year there can be some resolution."