WASHINGTON -- Rep. Jim Himes, D-4, a veteran of Wall Street and housing finance, says he hopes to play a major role in the reform of Fannie Mae and Freddie Mac, the two failed government-sponsored companies that have helped homebuyers get mortgages, but which are now in government custody.

Last week, the Obama administration urged Congress to consider options on reforming the two companies, which have cost taxpayers $154 billion so far, making them the most expensive bailout in the financial crisis.

`To play an active role'

That puts the problem smack in Himes' bailiwick as a member of the House subcommittee on capital markets and government-sponsored enterprises. Despite his junior status as a second-term House member and a member of the Democratic minority, Himes said he hopes "to play a really active role.''

"Having spent my non-political career in finance and housing, I am well-positioned to help out on this issue," he said in an interview. "This is a highly technical area -- but so are financial derivatives. And my experience in derivatives during my first term shows that if you have some expertise and people trust you, they will come and seek your views.''

Himes spent 12 years with Goldman Sachs, the Wall Street giant, before joining the nonprofit Enterprise Community Partners, where he worked on financing housing units in the greater New York area.

As a freshman, Himes worked on the Dodd-Frank financial reform bill that established a regulatory structure for derivatives, the often-complex securities that rely on the value of other assets such as mortgages.

Rep. Maxine Waters, D-Calif., the top Democrat on the panel, said her subcommittee "is the right place for'' Himes. "He comes to the table, given his professional background, extremely knowledgeable about the capital markets and our complex financial system.''

Reforms needed

More Information

What are they? What happened? The Federal National Mortgage Association is known as "Fannie Mae." The Federal Home Loan Mortgage Corporation is known as "Freddie Mac." Both companies held congressionally approved corporate charters but were stockholder-owned, a rare hybrid known as "government-sponsored enterprises," or GSEs. Their mission is to provide financing to mortgage lenders by buying their mortgages and reselling them or bundling them into new securities. They got off the track five years ago when, competing with Wall Street firms to build and sell mortgage-backed securities, the GSEs lowered their standards and began investing in low-quality mortgages. When the housing market tanked and mortgage defaults soared, the two GSEs, holding billions of dollars of mortgages or mortgage-related securities, were on the cusp of bankruptcy. The Obama administration has urged Congress to consider various options on reforming the two companies.

The White House recommendations to Congress on the future of Fannie Mae and Freddie Mac were infused with political caution reminiscent of the administration's previous approach to health care reform, in effect tossing the problem to Congress and urging the lawmakers to follow some general principles.

One of those principles is to end up "winding down'' the two firms, the Federal National Mortgage Association ("Fannie Mae'') and the Federal Home Loan Mortgage Corporation (``Freddie Mac.'')

Both companies held congressionally approved corporate charters but were stockholder-owned, a rare hybrid. Hence, they are known as "government-sponsored enterprises,'' or GSEs.

Their mission is to provide financing to mortgage lenders by buying their mortgages and reselling them or bundling them into new securities.

They got off the track five years ago when, competing with Wall Street firms to build and sell mortgage-backed securities, the GSEs lowered their standards and began investing in low-quality mortgages.

When the housing market tanked and mortgage defaults soared, the two GSEs, holding billions of dollars of mortgages or mortgage-related securities, were on the cusp of bankruptcy. Congress and the Bush administration in 2008 enacted legislation that put the two companies in federal conservatorship and empowered the Treasury Department to plow financial support into the GSEs so they could honor their guarantees.

Too big

They were not only too big to fail -- they're too big to just shut down.

The Obama administration said it will work with federal regulators to gradually reduce the GSE role and encourage private capital to play the biggest role in housing finance.

In the meantime, the White House said Fannie Mae and Freddie Mac should only invest in mortgages that have at least a 10 percent down payment and to avoid loans for more expensive homes. The current ceiling is $417,000 nationally, but Congress approved emergency measures two years ago to raise the limits to more than $700,000 in high-cost areas. That ceiling is scheduled to dip to $625,000 in October.

Himes says one unexpected outcome of the emerging debate in Congress may be the embrace by Republican lawmakers of a government role in the mortgage market.

Traditional 30-year fixed rate mortgages "are as American as apple pie, they are the cornerstone of a family's ability to build wealth over time,'' Himes said. "But lenders don't' want to hold on to those mortgages -- they want to sell them. That goal could be significantly jeopardized if the government provided no backup or liquidity at all,'' he said.