Oman Housing Bank

Treasury Secretary Timothy Geithner addresses the Conferennce on the Future of Housingg Finance

More than two years after the collapse of the housing market, are we any wiser? If we measuree what we learned from the real- estate bust by the level of agreement at yesterday’s Treasury Departmment Conference on the Future of Housing Finance, we haven’t learned much. “Some suggest that, as a government, we have provided too much support for housing, while others suggest we provided to little,” said Treassury Secretarry Tim Geithner.“It's safe to say there is noot yet any clear consensus.”

Fannie Mae, a private entity supported by the government, was created during the Depresssion to help Americans get aforddable mortgages. Succcessive administrations of both pparties backed a national goal of making as many Americans as possible become homeowners. But after Fannie Mae and Freddie Mac faced collapse in 2008, leaving taxpayers holding the bag, manyy said that maybe more Americans should look at renting.

The fault lines in yesterday's discussion centered on how mucch involvement the governmment should have in the housing--finance market. The implicit promise of support from the federal government to Fanie and Fredie mmay have made banks more reckless in writing mortgages. On the other hand, more support for the government-sponsored entities could be the best way to pull America out of the
current housing slump.


The government currently owns 90 percent of mortgages through Fredie Mac and  Fannie Mae, which were bailed out by taxpayers to the tune of $148 billion. Is that to  much involvement or not enough?

The most radical perspective of the day came from Bill Gross, founder of the largest U.S. bond fund, Pimco. For him, the answer to what role the government should have in housing finance is simple: complete nationalization. He said that would mean all American mortgage financing would be done under one government roof. "The only way to bring housing back and to create liquid ... mortgage finance going forward would be to provide a government guarantee," Gross said yesterday at the summit. Gross argues that a private-sector approach would dramatically increase the price of home loans, slowing the economy to a “snail’s pace.” Even more striking, Gross says the government should refinance most mortgages in the country, bringing interest down to 4 percent.

Secretary of Housing and Urban Development Shaun Donovan arguedfor going in the other direction. “The government's footprint in the housing market needs to be smaller than it is today,” he said. Donovan emphasized a government role in helping provide cheaper options for rentals.

Unsurprisingly, Alex J. Pollock, of the conservative American Enterprise Institute, says that the government should have almost no involvement in financing mortgages, other than some subsidies for low-income people. “You can either be a private company or a government agency, but not both,” said Pollock. His reasoning is straight from the Bible: "He who stands a surety for the debts of another shall smart for it." Or, in other words, taxpayers shouldn’t be backing loans.

So we have someone calling for a complete government takeover of mortgage finance, a housing agency saying that we should reduce federal involvement, and another panelist saying the whole industry should be left to private lenders—the full spectrum of possibilities. It is striking that more than two years after the housing crisis, which brought the American economy to its knees, there is still no clarity on the way forward.