Continuing my comments on the GSE reform hearing going on right now before the House Financial Services Committee...
Geithner has made a case for letting him start the short-term reforms to housing finance while Congress addresses the system in the long-term. One problem is, though, that it is hard to see light at the end of the tunnel. There are sharp differences in views on Fannie and Freddie among the Republians and Democrats. Even among the GOP there is at least one member, Gary Miller, who is out there defending the GSEs (poorly, I might add). And then there is the Senate to consider, a whole new game.
But Geithner has made the point clear that this issue can't wait any more:
- "Each of the longer-term reform options we have outlined will require legislation from Congress, and we hope to work together with you and your colleagues to pass comprehensive legislation within the next two years. Failing to act would exacerbate market uncertainty and risk leaving many of the flaws in the market that brought us to this point in the first place unaddressed. We look forward to continuing the dialogue with consumer and community organizations, market participants, and academic experts as we work together to build a housing finance market that is stronger and more stable than it was in the past." (Emphasis added.)
Two years would be great if we could get it done. My own view is that this process should have started in 2008, so we are already over three years behind. But there seems to be a strong enough consensus that this is important to get fixed sooner than later.
Here are some thoughts on where the political process could go.
Part 1 of my comments on this hearing is here. More comments as the hearing develops...