Housing Takeaways

The administration’s big housing conference is over. A few thoughts:

Treasury secretary Tim Geithner assigned a degree of blame to the GSEs (Fannie Mae and Freddie Mac) for the housing crisis that a lot of the administration’s allies aren’t comfortable with. “Amid the general race to the bottom in standards across the private sector, Fannie and Freddie lowered their underwriting standards, providing guarantees for increasingly risky types of mortgages without charging nearly enough to cover the risk,” he said. And they were allowed to build up huge portfolios of risky mortgages that they couldn’t stand behind if things went south.

These two strategies, Geithner said, “were possible only because of a toxic combination of a perceived guarantee by the government and an absence of effective oversight. They were not the sole causes of the crisis, but they made the financial crisis worse.” Compared to many Fannie and Freddie apologists on the Left, this is a very tough line, even if it is not tough at all by conservative standards.

The panels were hugely stacked in favor of those who favor a continued strong role for the government in the secondary mortgage market (mortgage purchases and guarantees), and only slightly less stacked in favor of those who think the government has a role to play in promoting affordable housing, especially now that lenders are requiring better credit and higher down payments. (Well, most lenders anyway — not all.)

The only people here who are strongly making the opposite case are AEI’s Alex Pollock, who actually stole the show during the first panel, and Cato’s Mark Calabria, who spoke during one of the untelevised breakout sessions. Other than that, the overriding concern at the conference is keeping the government heavily involved in the mortgage market, either because private industry enjoys the guarantees or because affordable-housing advocates want the government to move more aggressively in areas where the private sector is no longer willing to take big risks without being compensated in the form of higher interest rates.

I’ll have more to say about this later — gotta catch a train. In the meantime, you can catch up on my updates on Twitter, or read Jim Pethokoukis’s Twitter feed for some good live observations. For now, the overall takeaway is good news/bad news: The good news is that Geithner appears to realize that Fannie and Freddie cannot return to the status quo ante (though how could really be for that?). The bad news is that this administration remains heavily influenced by people who are looking for ways to restore the status quo ante with regard to the affordable-housing agenda while making it look like something else is going on.

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