On Tuesday, August 17th, high ranking Obama administration officials kicked off a
conference on the future of housing finance. While the goal of this conference was to explore creative and different ways to ensure Americans’ access to housing finance options, the main theme of the conference seemed to be that not much would change despite a call for reforms.
Treasury Secretary Timothy Geithner called for "fundamental reform" but also said that government must continue to maintain a strong role of insuring new home loans. Currently, the government is backing 9 out of 10 new home mortgages, a level that many say is unsustainable and must come down. Obama officials, who are leading the reform efforts, envision a hybrid system that relies heavier on private industry to provide capital for new home loans but still features a government backstop for those loans. It doesn’t appear that the Administration is willing to accept more aggressive proposals offered by a few of the conference’s participants.
The two main alternatives offered at the conference were either to nationalize the entire home mortgage system or to allow the private sector to handle mortgages without any government assistance except for very narrow programs for low-income families. It appears that government’s preference is to retain what was good about Fannie and Freddie while guarding against risky behavior that led to their meltdown.
Tweet
