The Senate Committee on Banking, Housing & Urban Affairs is listening to options for replacing Fannie Mae and Freddie Mac, but it is not hearing a consensus. The Treasury recently outlined in a white paper three options for bringing back the private label securitization market. On Tuesday, expert speakers in front of the committee warned against rushing to push the private market too quickly. Everyone holds a different idea of what needs to be done to fix mortgage finance in the United States. "Fannie Mae, Freddie Mac and the FHA account for more than 90% of the mortgages in the country," said Tim Johnson (D-S.D.), chairman of the Senate Committee on Banking, Housing & Urban Affairs. "Determining the proper level of government involvement in the mortgage market is just one of the questions before this committee, and it is one that we need to thoroughly and carefully examine." Former economist for Freddie Mac, Arnold Kling, with the Mercatus Center Financial Markets Working Group at George Mason University, said "we should just say no" when it comes to government support of another solution. "It would be naïve to think the private sector always gets things right. But even more naïve to think government could get it right. The government is captured by special interests," he said. Kling tried to back up his point by pointing out the presence of Mark Zandi, chief economist, Moody's Analytics and Michael Berman, chairman of the Mortgage Bankers Association. Both institutions would benefit from a government guarantee on mortgage-backed securitizations (one possible Treasury solution). "Any scheme to bring a government guarantee is comparable to building a nuclear power plant on top of a fault line," Kling said. "Twenty percent down is the best guarantee." Johnson reminded Kling to not attack other witnesses. As for hedging the GSEs against future losses, Moody's Zandi recommends Fannie and Freddie be capitalized for 25% home price declines. In the past, the firm capitalized for 10% and that clearly wasn't enough, he said. He said he supports a hybrid system that will protect both taxpayers and investors. The downside, he said, is that mortgage rates will be higher, at least 100 basis points, after all of this. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.