Efforts to find a fix for America’s $5 trillion housing problem are creeping forward.
The White House said Tuesday it will hold a conference next month to lay out the options for repairing the nation’s broken-down housing-finance institutions. At the center of that mess, of course, are the cash-hemorrhaging mortgage investors Fannie Mae and Freddie Mac.
The Aug. 17 event at the Treasury Department in Washington will “bring together leading academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders for an open discussion about housing finance reform,” the administration said.
The announcement comes as Congress prepares to take up the issue as well. Rep. Barney Frank, the Massachusetts Democrat who runs the House Financial Services committee, said last week he plans to hold hearings in September on fixing the housing market.
Republicans have been blasting the administration over its failure to address the problems at Fannie and Freddie in the financial reform legislation that President Obama signed last week. The companies, up to their ears in bad loans as the house-price bubble deflates, have consumed more than $150 billion in taxpayer money since the government took them over in September 2008, and there is no end in sight.
Yet as ominous as the situation is, few responsible commentators are calling for the plug to be summarily pulled on the companies. Along with the Federal Housing Administration, they are currently responsible for financing almost all home mortgages in the United States.
Though that is clearly the mark of a very sick system, just what to put in its place remains a muddle. Blow up Fannie and Freddie without something to replace them, and you could make it much harder to get a mortgage — not exactly what the doctor is ordering for a weak economy.
The administration says further debate will be necessary before it can propose a new system next January. The White House statement offers few clues as to the direction the administration prefers.
“The Obama Administration is committed to delivering a comprehensive reform proposal that protects taxpayers, institutes tough oversight, restores the long-term health of our housing market, and strengthens our nation’s economic recovery,” Treasury Secretary Tim Geithner (right) said.
To that end, the White House this spring asked the public for comment on seven questions regarding housing reform. Among those responding were Alex Pollock of the American Enterprise Institute, a prominent critic of Fannie and Freddie who says phasing out the companies will allow a private secondary market for prime mortgages to develop.
“The GSE risk turkey, weighing in at $5 trillion, is now roosting in the dome of the U.S. Capitol,” he wrote. “Like Edgar Allan Poe’s celebrated raven, it won’t go away, so the elected representatives of the people can remember the mistakes they made in fattening it up so much.”
Update 12:02: I belatedly figured out how to click the ‘display comments’ box on regulations.gov and accordingly replaced my earlier remark about it being a bad sign that the Treasury link didn’t lead to the comments.