The timetable has yet to be determined, but a bipartisan proposal sponsored by Senators Mike Crapo (R-ID) and Tim Johnson (D-SD) would phase out the failed behemoths that are Fannie Mae and Freddie Mac. You may remember these quasi-private entities, considered “government-sponsored enterprises,” were taken into government conservatorship in 2008 during that financial crisis and they have been wards of Uncle Sam since. And while the government has allegedly made back the $187.5 billion it cost to bail them out, the sentiment is that we shouldn’t risk making another similar mistake.

But the major flaw in the Crapo-Johnson plan is that it simply replaces Fannie and Freddie with a new agency called the Federal Mortgage Insurance Corporation, which would be similar to the Federal Deposit Insurance Corporation (FDIC) with which bank customers are familiar. Nor is there much taxpayer relief, as Fannie and Freddie’s responsibility for failed loans declines only from 100% to 90%. That’s not much “skin in the game” for private lenders.

Crapo and Johnson see this as an evolution of a similar bill drafted last year by Senators Bob Corker (R-TN) and Mark Warner (D-VA), one that gives more of a timetable for changes. Barack Obama indicated that the Corker-Warner bill was “consistent” with his vision for reform, which doesn’t exactly recommend it.

On the other hand, this proposal doesn’t go as far as a House bill introduced last year by Rep. Jeb Hensarling (R-TX), called the Protecting American Taxpayers and Homeowners (PATH) Act. Hebsarling’s proposal would wind down Fannie and Freddie completely in five years; in its place would be what Hensarling called the National Mortgage Market Utility, in which participation would be voluntary.

Many of our more seasoned readers may recall a time when a prospective homeowner scraped up a large sum of money for a down payment, went to the bank downtown, and if the bank found that buyer worthy of their business, the bank wrote the loan and held on to it for the entirety of the term. But as is often the case, something that worked was a problem to the government and this “solution” will likely need to be addressed in a few short years.