Like a proposed overhaul of the tax system, a reworking of the U.S. mortgage finance system that includes winding down Fannie Mae and Freddie Mac is unlikely to get too far during an election year.

But that doesn’t mean that a proposal to do just that, put forward today by Senate Banking Committee leaders, won’t end up serving as the foundation for action lawmakers could take after the election.

Although Fannie and Freddie are profitable again, there’s general agreement that the way the companies were structured before the housing bust — with company executives and investors reaping big profits while taxpayers shouldered the risk — was unwise.

The plan put forward today would still provide a government backstop, but abolish Fannie and Freddie and replace them with private insurers who would assume the brunt of initial losses on the mortgage securities that finance most home loans.

House Republicans have “a very different view of how GSE reform should proceed,” analysts at Bank of America Merrill Lynch said in a note to clients, MarketWatch’s Ruth Mantell reports.

But at this point, nobody really expects Fannie and Freddie to survive — even investors who have driven the companies’ share prices up 1,200 percent in the last year. Mantell says investors are pinning their hopes on lawsuits against the government challenging 2012 amendments to a bailout agreement, which mandates that all profits the companies make go to the U.S. Treasury. Source: marketwatch.com.

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