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Topic - Brian Gardner
J.P. Morgan's announcement of a spectacular trading loss of $2 billion last week gives fuel to regulators who are inclined to slim down or at least stop the growth of such "too-big-to-fail" megabanks in the future, banking analysts say.
"The most likely way that Fannie and Freddie survive is for Congress to do nothing and totally abandon mortgage finance legislation," said Mr. Gardner. "If this is the outcome, we expect it will be a long, painful death for reform legislation because many in Congress will be unwilling to give up the fight."
While both sides seem to agree about phasing out most of what Fannie and Freddie do to package mortgage securities and sell them to investors with an implicit government guarantee, major sticking points have emerged beyond that over the government's role as a last-resort guarantor and promoter of affordable housing, he said.