The House Financial Services Committee held a hearing yesterday to discuss the future of Housing Finance- What Should the New System Be Able to Do?
MortgageNewsDaily provided a rundown of provided testimony of all
panel
members, summarized the sense of the hearing in a number of areas
including the Adminstration's objectives on the future of the GSEs and
government
guarantees. READ MORE
Below are brief recaps of news stories and perspectives we've read on the topic so far:
The New York Times provided a broad overview of the hearing. From the story: "Mr. Geithner ruled out nationalizing Fannie and Freddie or creating several entities to compete with them. But he said it was worth considering a public-utility model, in which the entities would guarantee mortgages without maintaining investment portfolios, thereby limiting the systemic risk they would pose. Mr. Geithner’s predecessor, Henry M. Paulson Jr., had endorsed such a model."
Bloomberg led with
Geithner's call for an end to the "ambiguity" over government
involvement with the two corporations and his endorsement of a "need to
redesign federal guarantees in housing finance."
According to the news
service, Geithner said that Freddie and Fannie's debt was different from U.S.
sovereign debt and should not be consolidated into the government's balance
sheet, but "We are going to make sure that these institutions have the
resources they need to meet their commitments past and future."
He pledged that the
administration would seek to avoid disruptions to GSE's ability to honor its
obligations or the liquidity of mortgage-backed securities and he disagreed
with committee chairman Barney Frank (D-MA) that the corporations should be
phased out. The Treasury Secretary said
that the government instead needs a new system to finance housing in which
"we preserve the good but end what was too risky."
The Los Angeles Times also emphasized the Treasury Secretary's support
for guarantees of GSE debt, quoting his statement that he opposed either permanently
nationalizing the two or creating new quasi-governmental corporations to
compete with each other. Instead he supported two approaches recommended by
Federal Reserve Chairman Ben S. Bernanke.
One would privatize the GSE's but continue some form of government
guarantees; the other would restructure them into public utilities where the
government would regulate profits, set fees, and provide guarantees for their
assets. MND discussed the explicit guarantee HERE
The Washington Post said that
Geithner told the panel that the administration would retain the best parts of
the housing finance system while it overhauls the parts that did not work. He insisted that the old system would
not be re-created "and that Fannie and Freddie's status as
shareholder-owned companies with the implicit backing of taxpayers would
end." The Secretary added that the
government "would make clear what it stands behind and what it doesn't.
The
Washington Post also mentioned Frank's concern that the
debate over housing policy focused too much on home buyers and not enough on
providing more affordable rental housing.
The Wall
Street Journal suggests that Treasury Secretary Timothy Geithner could have used Tuesday's speech on the mortgage market to convince America it is time to end its relationship with housing subsidies. Instead, he suggested ways to make it less dysfunctional.
The Journal also covered a
word-for-word exchange between the Secretary and Rep. Garrett over the fine
distinction between classifying the GSE's debt as "sovereign" and
saying that the government would do everything necessary to make sure these
institutions have the capital they need to meet their commitments. The story called attention to Geithner's emphasis on the administration's commitment to
back
GSE debt as an attempt to "reassure investors (including foreign
governments) that own the companies' debt." This, the Journal
said, was needed in light of a statement made by Rep. Frank two
weeks
earlier in which he suggested the U.S. should force debt holders "to
take
a haircut." Frank later modified
those statements.
The
Boston Herald wrote a piece focusing on an
exchange
between committee chairman Barney Frank (D-MA) and Rep. Scott Garrett
(R-NJ)
over who caused the collapse of the two Government Sponsored Enterprises
(GSEs). According to the Rupert Murdoch owned paper, "Garrett got the
blame-game ball
rolling by taking digs at House Financial Services Committee leaders for
waiting so long to tackle the thorny issue of what to do about the
firms. Frank... shot back in a long response that it
was Republicans, not Democrats, who controlled Congress through most of
last
decade and that they balked at reforming Fannie and Freddie before they
imploded."
Barrons reported
that Geithner said the administration didn't want to fully nationalize the GSEs
but that "he hasn't yet seen a workable proposal for a fully private
alternative."
MarketWatch covered estimony given by NAR spokesman Vince Malta. NAR
urged that Freddie Mac and Fannie Mae be restructured as government-chartered,
non-shareholder owned authorities. Malta
said "The new
Fannie and Freddie must ensure there is always mortgage capital available for
creditworthy buyers and that taxpayer dollars are protected." He cautioned
government about moving too quickly in restructuring the GSEs. "The
housing recovery is still too fragile for the government to completely step
away, and any disruption in the marketplace now by doing something too radical
would be harmful," he said. "Our goal is to help Congress and our
industry design a secondary mortgage model that will serve America's best
interest today, and in the future."
A
second MarketWatch article said that Geithner painted a "bleak
picture" for the House Committee, summarizing his testimony thus: "There is no happy ending
for the government's bailout of the mortgage giants. The transition from public
to private support of the markets isn't anywhere close to reality. Worse, no
clear plan has emerged to do the deed."
The Voice of Housing calls attention to the Three R's