WASHINGTON, DC—The GSEs are going to be history if any number ofpoliticos in Washington has something to say about it, which theydo. The most recent player to discuss their fate was US HUDSecretary Julian Castro, who told BloombergTelevision earlier this week that Congress should begin theprocess of their privatization.

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Yesterday we spoke with people in the industry who are sanguine about theGSEs' expected departure from the scene. Today we hear theother side.

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Some people, such as Bill Baumann, seniormanaging director of Chicago-based Kiser Group,can't help but point to the disruption their dismantlement willcause.

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"Winding down multi-billion dollar enterprises like Fannie andFreddie even over the proposed five-year period under theJohnson-Crapo bill would be a monumental challenge," he tellsGlobeSt.com. "While Fannie and Freddie today account forapproximately 35-40% of the multi-family mortgages originated byfinancial institutions, they represented probably 85% in 2009 whenother lenders left the market. The recent real estate recovery,which has been led by multi-family, was largely fueled andsupported by the government backed guarantee of Fannie and Freddie,and, unlike the agencies' single-family division, was done at aprofit."

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From a political perspective, there may be more common groundamong the parties on this issue than many other issues currentlybeing debated in Congress, he concludes. That said, reaching abi-partisan agreement and passing a bill which doesn't threaten tode-stabilize the multi-family sector is still a tall order.

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Another person with doubts is Bonnie Y. HochmanRothell, a Washington, DC-based partner at Morris,Manning & Martin, LLP.

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She says the government would be better off at least maintainingthe multifamily side of Fannie and Freddie or at the very least, ifthe system must be replaced by private finance then back it with agovernment guarantee.

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It is noteworthy that banks, life insurance companies andcommercial mortgage backed securities have reentered the market ingreater strength over the past few years and are increasing inmarket share, Rothell tells GlobeSt.com. "However, experts questionwhether they could totally replace the GSEs role and the betterapproach would be to maintain the multifamily side of the GSEs orto go with the semi-privatized model with governmentguarantees."

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