Had they not followed Wall Street and the private banking sector into the subprime abyss, they would, in my humble opinion, not be currently under the management of the federal government.
Let’s fix what’s broken and leave alone what works. To fix the nations’ affordable housing policy, we support bringing the GSEs to their former public-private status, but with some key changes.
First: ensure that a capable oversight body, with enforcement authority, is in place to guard against future exorbitant risk-taking and to require adequate capital reserves.
Second: prohibit the GSEs from entering high-risk securitizations; their oversight agency can determine the types of loans that have questionable and too risky underwriting criteria.
Third: make sure that their affordable-housing goals really benefit those who, but for the efforts of the GSEs, would be left out of the housing market. Finally, limit the total market share that each GSE can capture. These recommendations are outlined in full in the National Community Reinvestment Coalition’s commentletter to the Obama administration.
We also recommend that Congress expand and strengthen the Community Reinvestment Act, which requires that lending to expand access to capital and credit be done in a safe and sound way. A coalition of over 260 organizations has urged Congress to act this fall to do so.
As the Obama administration weighs its options, I hope it doesn’t throw out the baby with the bath water. Fannie Mae and Freddie Mac, reconstituted and reformed, can play a critical role in the housing market, but they should never be allowed to join Wall Street in whatever financial shenanigans it has in store for us in the future.
John E Taylor is president and CEO of the National Community Reinvestment Coalition. He can be reached at email@example.com