The President’s proposed overhaul of the financial system ignores two key contributors to the crisis last fall.  Fannie, Freddie Were at Center of Financial Crisis But Are Not Included in Obama’s New Financial Regulations

…Testifying before the Senate Banking Committee on Thursday, Treasury Secretary Tim Geithner said that the administration’s new regulations were only meant to address the most fundamental issues of the recession.

“We considered a full range of options and decided that now is the time to pursue the essential reforms,” Geithner said. “Those that address the core causes of the current crisis, and that will help to prevent or contain future crises.”

Those “essential reforms” include the establishment of a new Financial Oversight Council to coordinate between banking regulators and watch for systemic risk; new powers for the Federal Reserve to supervise all systemically important firms; a new National Bank Supervisor to oversee all federally chartered banks; and new powers to allow the federal government to wind down any failing financial institution…

Apparently Fannie and Freddie are just annoying distractions.  A strange position for the White House to take, when you consider this:

The absence of either Fannie or Freddie is notable, because the two companies once owned or controlled nearly $6 trillion worth of home and commercial mortgages, nearly half of the total U.S. mortgage market – and both companies were pioneers of the now infamous sub-prime mortgages that caused the mortgage market to implode late last year.

And this:

During Geithner’s Senate testimony, he admitted that both Fannie and Freddie played a central role in the financial crisis, telling Sen. David Vitter (R-La.) that the two government-sponsored enterprises (GSE) were a “core part” of the country’s financial woes.

“Absolutely,” Geithner said. “Fannie and Freddie were a core part of what went wrong in our system.”

Don’t worry, though.  Mr. Geithner plans to free up some time to deal with the duo, sometime:

Geithner explained that the administration did not have the time to come up with coherent regulations regarding Fannie and Freddie because of its other legislative priorities.

“We did not believe that we could have, in this time frame, lay out a sensible set of reforms to guide and determine what their future will be,” said Geithner. “We didn’t think it was an essential thing to do just now, but we do believe it is an essential thing to do.”

The delay is because he hasn’t yet come up with an endgame:

“Our challenge with Fannie and Freddie, and this is true about the government’s role in the housing market more generally, it’s more a challenge for exiting, what the future should be,” said Geithner.

“We have to fundamentally rethink what the appropriate role of the government is in the future [because] we did not get that right [in the past],” said Geithner. “It’s more about the questions we face about how the government gets out of and dials back and reverses these extraordinary actions we’ve been forced to undertake.”

I think Mr. Geithner and President Obama know exactly what role they want the Federal government to play in the housing market.  They want more control, not an exit strategy, and the free market poses a fundamental problem for that.  Why else did their reforms focus on increasing Federal control of the private sector?