Reining in Fannie and Freddie

The home-mortgage companies nicknamed Fannie Mae and Freddie Mac have long needed better oversight. As government- sponsored enterprises, they account for 45 percent of home mortgages, and the country can't afford to let them falter or fail.

A bold attempt by the Bush administration and some in Congress to tighten regulation of these giants gained momentum after Freddie Mac fired three top executives this year in an accounting scandal. But that effort has been stymied by the pair's legendary lobbying abilities. Congress may not take up a bill until next year.

The administration is right to guard financial markets from an Enron-style disaster by shifting regulatory oversight of Fan and Fred to the Treasury Department from Housing and Urban Development. Treasury needs the ability, for example, to approve Fan and Fred's new products.

If Congress doesn't take this step, it should sever Fan and Fred's advantageous ties with the government - which include a symbolic line of credit that gives the illusion taxpayers would bail them out in a pinch.

Such a move would also help put Fan and Fred on a level playing field with their competitors. While privatizing both Fan and Fred is the ultimate way to do that, tougher regulation, enacted sooner rather than later, would be a welcome interim step.