Geithner says Fannie, Freddie overhaul must wait

US Treasury Secretary Timothy Geithner on Tuesday swatted aside pressure for a swift reform of troubled government-backed mortgage giants as data pointed to a still struggling real estate market.

Geithner told Congress any restructuring of lenders Fannie Mae and Freddie Mac, which received a 100-billion-dollar-plus government bailout at the height of the housing crisis, "must be done as part of a reform of the wider housing finance system."

Facing pressure from Republicans for a quick unwinding of government's role in the market, Geithner argued reforms would "take several months" to develop and should only be "enacted and executed at a time of greater market stability."

"Private capital has not yet returned to provide the amount of funding that would be needed to allow families to get a mortgage to buy a new home or to sensibly refinance the house they already live in," he said.

Without Fannie and Freddie's continued activity, "mortgage rates would be higher and homeowners would have a significantly harder time obtaining credit," he said.

That view appeared to be supported by figures published on Tuesday showing the massive real estate market was still struggling to recover from the effects of the biggest economic crisis since the Great Depression.

The National Association of Realtors on Tuesday said existing-home sales slipped 0.6 percent nationally in February, the third straight monthly drop.

But the association said widespread winter storms in the second month of the year might mask underlying demand.

"Some closings were simply postponed by winter storms, but buyers couldn?t get out to look at homes in some areas and that should negatively impact near-term contract activity," said Lawrence Yun the association's chief economist said.

But Republicans lambasted Geithner for failing to reform the two lenders more than 18 months after the government was forced to prevent their collapse.

Shelley Moore Capito, a Republican from West Virginia, argued normal market activity was improving but would not fully resume until the so-called government-sponsored enterprises (GSEs) are reformed

"The nation's housing finance system is slowly recovering but the system is being dominated by the GSEs and we need to work together to restore a strong private market presence," she told the financial services committee of the House of Representatives.

Geithner promised Fannie and Freddie's future roles "will be fundamentally different from the role played in the past," arguing that the mixture of private investment and government preferences had failed.

"The housing finance system cannot continue to operate as it has in the past," he said "private gains can no longer be supported by the umbrella of public protection.

"Capital standards must be higher and excessive risk-taking must be appropriately restrained," he added.