GOP candidates offer their cure for what ails housing
Former Speaker of the House Newt Gingrich, whose firm represented Freddie Mac at the height of the housing bubble, advocated abolishing Freddie and Fannie Mae during a Wednesday night GOP debate focused largely on the economy.
Gingrich also took another jab at Federal Reserve Chairman Ben Bernanke while Rep. Michele Bachman (R-Minn.) said she'd repeal the Dodd-Frank Act if she's elected president.
Republican presidential candidates' had a variety of ideas on how to solve the housing crisis during the debate “Your Money, Your Vote” broadcast on CNBC, which said housing has lost $7 trillion since 2007.
Now five years into the housing crisis, the sector remains sluggish with some 4 million people behind on mortgage payments or in foreclosure and nearly 23% of residential properties upside down.
Gingrich was asked what he did with $300,000 that Freddie paid his firm in 2006.
"I offered them advice on precisely what they didn’t do," Gingrich said, causing the audience to laugh and applaud.
Gingrich denied that he was lobbying on behalf of Freddie Mac to prevent the Bush administration from curbing the GSEs' power.
"I said to them at the time, 'This is a bubble. This is insane. This is impossible.' It turned out, unfortunately, I was right," Gingrich said. "I think this is a good case for breaking up Fannie Mae and Freddie Mac and getting much smaller institutions back into the private sector to be competitive and to be responsible for their behavior."
When asked if he would shut the GSEs down even if it meant higher interest rates for Americans, making it more difficult for Americans to obtain home loans, former Godfather Pizza CEO Herman Cain said he would first "fix the real problem, which is growing the economy,' by implementing his "bold" 9-9-9 plan.
Cain said he would then move the GSEs "out of the way" so that small and medium-sized banks would have more certainty and be in a better position to help homeowners "reset" their mortgages. After doing that, he would turn the GSEs into private entities.
"The government does not need to be in that business," he said. "I would find a way to unwind Fannie Mae and Freddie Mac such that the marketplace can determine the future of the housing market."
Former Massachusetts Gov. Mitt Romney reiterated his previous view that the foreclosure process should play out so that the housing market can recover and free markets can work.
We "have to allow the economy reboot," he said. "The best thing you can do for housing is to get the economy going and get people working again," he said.
"What we know won’t work is what this president's done, which is try to hold off the foreclosure process — the normal market process — to put money into a stimulus that failed, and to put in place a whole series of policies from Obama-care to Dodd-Frank that have made it hard for this economy to get going," he said.
Since February 2010, 2.7 million jobs have been created but the housing market has continued to decline, according to statistics CNBC cited during the debate. Housing price levels are at 2003 levels, and if this trend continues, in five years, we'll be at 1999 levels, the network said.
"The reason we have the housing crisis we have is that the federal government played to heavy a role in our markets," Romney said. "Barney Frank and Chris Dodd told banks they had to give loans to people who couldn’t afford to pay them back."
Instead of singling out regulators, Texas Gov. Rick Perry simply railed against regulation as a whole.
"That’s lunacy," Bachman said. "We need to put them ... into bankruptcy and get them out of business. They're destroying the housing market."
Write to Justin T. Hilley.
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