Phase Out Fannie Mae and Freddie Mac?

The Treasury's plan for Fannie Mae and Freddie Mac - which together form the backbone of America's secondary mortgage market - calls for shrinking the agencies' portfolio holdings of mortgage securities over a long period starting in 2010.

The mortgage repackaging agencies' role in the current financial crisis, plus the fact that U.S. taxpayers are now explicitly on the hook for their combined $5 trillion-plus liabilities, signals an eventual tug-of-war in Washington over the companies' future size, organizational form and even ownership.

One camp wants to radically shrink them, eliminating much of their portfolio investing activity and turning them back toward their original mission of guaranteeing the payments on mortgages owned by other entities. At its most extreme, this view calls for breaking up the firms entirely, and leaving it to the free market to provide liquidity for mortgages without any government backing.

On the other side are congressional Democrats, who want Fannie Mae and Freddie Mac to pick up where they left off, after the current crisis passes. This group tends to see the two mortgage giants' past and future profits as a kitty to pay for expanded home ownership among America's poor.

Given the mortage market's central role in the credit crunch, and given Fannie and Freddie's central role in the mortgage market, the agencies' future affects financial professionals not only as taxpayers and voters, but also in relation to their careers.

Where do you stand on this question? Now that the federal government has seized Fannie Mae and Freddie Mac, should it aim to ultimately rebuild those institutions to their pre-crisis posture?

Or, should the government move toward shrinking their size and scope of activity - or even phase them out altogether?