In today's Wall Street Journal the editors took Republican's to task for slow going in the GSE reform debate and generally for a weak sauce approach to fixing the housing finance reform system. Readers of this blog and my columns know that a lot of what I have written supports a piecemeal approach to housing finance that gets the process going with a bi-partisan approach and some small bills through the legislative gauntlet done up front to start the process of letting the private sector back into the mortgage finance system early before the extended debate over long-term starts. I sent this letter to the editors today:
While these pages have for the past several decades been a place of refuge for both sound and prescient thinking on the saga of Fannie Mae and Freddie Mac, your most recent political analysis (“Blinking on Fan and Fred”) is unfortunately off the mark. While the Republicans deserve repeated reprimands for past failure to substantively reform government-sponsored enterprises, the current approach to housing finance reform is the best way to start the process of reducing federal crowding out of private capital and protect taxpayers.
The goal of a piecemeal approach is not to hope at least few of the bills will get through the legislative gauntlet. Rather, it acknowledges that speeding up portfolio reduction, raising guarantee fees, and ensuring that qualified residential mortgage requirements apply to Fannie and Freddie are ideas that cannot wait until a big, comprehensive bill gets through the long legislative process. Plus, Rep. Scott Garrett (R-NJ) has been clear that his subcommittee plans to tackle long-term reform in the coming months.
At a housing finance reform hearing on Thursday, nearly all interested parties—including the realtors, homebuilders, mortgage financiers, and even Rep. Barney Frank (D-MA)—agreed that the eight legislative ideas put forth by the GOP were largely desirable. And before the housing finance reform debate gets bogged down on the important question of whether or not Uncle Sam will backstop mortgage lending with taxpayer money, these necessary legislative actions need to move forward. This great first step and the second step is close behind.
See my testimony from February that laid out many of the ideas introduced in the GOP housing finance reform package.