Posted on Monday, February 14, 2011
Congressman Garrett discusses his goals for privatizing the mortgage market on CNBC's "The Kudlow Report."
Housing finance reform continues to be a top priority of mine this Congress. To date, the government’s intervention to rescue Fannie Mae and Freddie Mac has cost the American taxpayers $150 billion, and continues to grow with each passing day. Because of the ongoing bailout of the housing giants, 95% of the mortgage market is now being subsidized by the federal government. The status quo is simply not sustainable – the time has come for the government to get out of the business of housing finance and let the private markets do their job.
I kicked off efforts to address Fannie and Freddie reform in a speech earlier this week at the American Securitization Forum’s annual conference. I then convened my first hearing on Wednesday as Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises to examine the immediate actions Congress can take right now to protect taxpayers from the ongoing bailout.
As I mentioned in my speech at the ASF conference and then later at the hearing on Wednesday, I believe we need to thinking about the things we can do right now, this very instant, to: 1. Protect taxpayers; 2. End the bailouts; 3. Get private capital back in to the mortgage markets; and 4. Reduce the government’s role in housing finance.
The first thing we need to do to achieve these overarching goals is address the $1.5 trillion combined portfolios of Fannie and Freddie. Right now, the portfolios are set to decrease only by a small percentage each year. I believe this could happen faster. Second, it’s time that we were honest and transparent with the American public and finally placed Fannie and Freddie on the federal government’s budget. If Fannie and Freddie are finally put on budget, the increased budgetary pressure would force Congress and the Administration to deal with the debt instead of letting it continue to languish. Another area that should be addressed is the Conforming Loan Limit, which currently stands at almost $730,000. It simply does not make sense to want to increase taxes to those who would be able to afford a house of that price, and at the same time have the government subsidize them when they want to purchase one. Finally, the Affordable Housing Goals, which numerous studies point to as one of the main causes of the woes plaguing Fannie and Freddie, should be abolished. The only goal these two entities should have is to reduce their burden on the American taxpayer.
As I concluded in my speech, I have faith in our country’s entrepreneurial spirit and I believe we can establish an efficient free-market housing finance system. I don’t pretend to think wholesale reform of Fannie and Freddie will be easy – especially given the special interests of the industrial housing complex that have a vested interest in stalling reform. I do believe, however, that the American public is ready to finally tackle this problem. The day of reckoning has arrived – it’s time to protect the taxpayers and end the bailouts once and for all.