Treasury seeks public comments on reform plans for housing-finance system
Thursday, April 15, 2010
Nineteen months after the government seized mortgage-finance giants Fannie Mae and Freddie Mac in what has become the costliest bailout of the financial crisis, the Treasury Department on Wednesday began the process of overhauling them.
But for all the drama associated with the takeover of the companies and the implications for the U.S. economy, Treasury unveiled a statement listing seven questions for the public about how to remake the nation's housing-finance system.
Fannie and Freddie have played essential roles in the government's strategy for reviving the housing market, but they have needed more than $125 billion in taxpayer aid to stay afloat. The companies guarantee that investors in home loans are made whole and lately have spent much of their time reworking mortgages to make them more affordable. The Obama administration has pledged unlimited financial aid to them.
The administration's broadly worded questions seek commentary on the value of home ownership versus rentals; the role of government in providing funding for home loans and taking on risks; how government policy should account for differing needs for home loans across regions and income levels; and other topics.
The Treasury Department, preoccupied with the ongoing negotiations on Capitol Hill over financial regulatory reform, has reluctantly engaged the housing-finance issue in recent weeks as calls to begin the debate have grown louder from lawmakers on both sides of the aisle.
The department will gather comments through a Web site, Regulations.gov, as well as public forums scheduled throughout the year. The administration has said it would like to make its legislative proposal early next year, after failing to meet a deadline earlier this year of producing a preliminary report on how to recast the nation's housing-finance system.
"A well-functioning housing-finance system is critical to the long term stability of the housing market," Treasury Secretary Timothy F. Geithner said. "Hearing from a wide variety of perspectives as we embark on this process is an important part of establishing a more stable and sound housing finance system for the American people."
But Republicans, who blame the housing-finance system for causing the financial crisis, said this approach was too incremental.
The administration's "plan is to basically poll the American people to ask what they want to do about housing finance and [Fannie and Freddie]. We don't need polls, we need leadership," said Rep. Spencer Bachus (Ala.), the top Republican on the House Financial Services Committee. "The press release accompanying this list of questions says their goal is to be transparent. What is abundantly clear is that the Obama administration has no real plan for dealing with housing finance."
Fannie Mae and Freddie Mac existed for years as odd hybrids, created by government to support housing but owned by private shareholders.
Geithner has told Congress that the Obama administration would seek to keep in place aspects of the housing-finance system that have worked well during the past few decades as it overhauls the parts that did not.
But the Treasury secretary said that Fannie and Freddie's status
as shareholder-owned companies with the implicit backing of taxpayers would end.