Treasury Secretary Henry Paulson recommended replacing Fannie Mae and Freddie Mac with utility-like companies that would guarantee mortgages without maintaining investment portfolios.

“A public utility-like mortgage credit guarantor could be the best way to resolve the inherent conflict between public purpose and private gain,” Paulson said in a speech yesterday to the Washington Economic Club.

Paulson joined Federal Reserve Chairman Ben S. Bernanke in stating a need for a permanent government role in mortgage financing.