Treasury Secretary Timothy Geithner has said that the administration wants to bring private capital back to the housing finance market. But without reopening Dodd-Frank and reigning in the Federal Housing Administrations (FHA), winding down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac will not be enough to allow the private market to return.
Wallison explains that:
- 90% of the mortgages made today in the United States are government-backed.
- Although the administration finally seems willing to move on housing finance reform, Secretary Geithner's plan is seriously deficient.
- Geithner's aim to wind down the GSEs and revive the private sector financing system is the right goal, but it cannot be achieved unless the FHA is also reduced in size and scope.
- Finally, to be credible, the administration's plan must also modify or repeal the provisions of the Dodd-Frank Act that will prevent the revival of a private securitization system.
Peter Wallison previously served as general counsel of the Treasury Department, White House counsel to President Reagan, and as a commissioner on the Financial Crisis Inquiry Commission. He can be reached at email@example.com or through firstname.lastname@example.org.
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