The current housing finance system, in which Fannie and Freddie guarantee payments to investors in nearly 60 percent of U.S. mortgages, is likely to be with us until after the 2014 midterm elections and probably well beyond.
There are many reasons for this. The first is that the Senate Banking Committee is taking up its bill authored by Chairman Tim Johnson, D-S.D., and ranking member Mike Crapo, R-Idaho, far too close to the midterms. Partisans on both sides are already turning the issue into a political weapon rather than an area for serious negotiation and dealmaking.
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On the right, a group of 26 conservative organizations including the Competitive Enterprise Institute, the Club for Growth and the National Taxpayers Union wrote to members of Senate Banking this week strongly opposing the Johnson-Crapo bill.
The groups blasted the effort, which would replace the GSEs with a Federal Mortgage Insurance Corp., saying it "does not constitute real 'reform,' but an expansion of the type of government intervention that fueled the housing crisis in the first place."
On the left, the National Urban League wrote to members that the bill would not do enough to promote affordable housing and flatly rejecting the idea that the GSEs played a major role in the mortgage crisis.
Meanwhile, proponents of a modest version of housing reform such as Johnson-Crapo, are being very tepid in their support.
White House Council of Economic Advisors Director Jason Furman and CEA member James Stock wrote an op-ed in The Wall Street Journal on Friday that it was critical to pass some kind of reform.
But they committed to no specific bill and used the kind of gauzy language usually associated with the beginning of a legislative effort rather than a last-ditch attempt to get something done before the 2014 midterms.
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"[T]he current period of relative economic calm is exactly the right time" to reform the housing finance system, the White House officials wrote. "The Senate Banking Committee is making promising bipartisan progress on this crucial task, and the administration looks forward to continuing to work with Congress to forge a new private housing-finance system."
A basic translation of that piece would read: "We want to be associated with the idea of GSE reform without getting tied to anything specific that might hurt us and we know nothing is going to happen anytime soon and we plan to do almost nothing to help."