Obviously something needs to be done with these 2 mortgage giants. Fannie Mae and Freddie Mac have been under the receivership of the federal government since Fall of 2008. Odds are high that either Fannie or Freddie own the 1st mortgage on your home right now.
Congressman Barney Frank, chairman of the House Financial Services Committee, is calling for the whole secondary mortgage market system to be scrapped and to come up with a new one. USA Today article.
To me the Fannie / Freddie system seemed to work well until all these non-conforming and sub-prime loans came into the picture. If we could just keep those type of loans away from Fannie and Freddie, I think the system would work just fine. There's not much anyone can do to prevent prices from falling in half anyway.
Maybe these 2 giants need to be broken up similar to what happened to AT&T in the 1980s. Or maybe all the bad loans need to be sold off to some other entity in order to deal with them directly. Regardless the government shouldn't be controlling this much of the real estate industry.