It might be too late for us to stop Rome from burning, but we can have an active role in how it is rebuilt. Like a raging fire, there is little chance we can quickly convince the federal government that nationalizing Freddie Mac and Fannie Mae will have significant long-term damage. However, the next administration and congress will have a lot to say in the future of the federal government's role as mortgage-lender.
While the mortgage market's woes will never become the prevailing issue in the Presidential campaign, it is a significant concern and a part of the larger question on the economy. The philosophical preferences of each candidate are muddy, considering that election politics rarely mirror actual action. However, take it for what its worth, both Obama and McCain have issued statements on what they would do as President with the mortgage giants. According to Bloomberg:
"John McCain and Barack Obama agree the Treasury needed to step in to rescue Fannie Mae and Freddie Mac. They disagree over how much the U.S. government should be involved in the housing market once the immediate crisis is past.
Republican Senator McCain of Arizona wants the government to take over the two agencies, split them up, and then exit the mortgage-finance business by selling them off. Democratic Senator Obama of Illinois is suggesting a more lasting federal involvement."
According to Douglas Holtz-Eakin, McCain's economic adviser, McCain would get Fannie and Freddie "completely off the taxpayers' back," and he backs a proposal from Alan Greenspan that would break the companies up and sell the pieces off.
Obama said a bit more cryptically this weekend, "We must ensure that any plan clarifies the true public and private status of our housing policies. We have to make clear that in our market system investors can't be allowed to believe that, unlike working families, they can simply invest in a 'heads they win, tails they don't lose' situation."
In any case, as Bloomberg reporters Rich Miller and Matt Benjamin point out, whoever wins the presidential race will have to get a plan through a Democratic-controlled Congress that strongly supports Fannie Mae and Freddie Mac.