The U.S. Treasury has responded to a report in the Washington Post that said President Obama's administration is seeking a proposal for how government can maintain a large role in the housing finance market.
The report suggests that the President, responding to advice from senior economic and housing advisors, has directed some advisors to develop a proposal that would extend a federal loan subsidy for most home buyers and preserve the government's major role in housing finance.
Deputy Secretary of the Treasury, Neal Wolin, issued the Treasury's response calling the report a mischaracterization, stating that the private sector, with strong oversight and consumer protection, should the the primary provider of mortgage credit.
Wolin points to the three options presented by the administration to congress that each called for ways to limit the government's role in supporting housing finance. He acknowledges that Fannie Mae and Freddie Mac are, for now, playing a critical role in providing support to the struggling housing market. However, the proposals being considered each call for different ways to wind down the government sponsored entities (GSEs).
Siting sources close to the discussions, the Washington Post article indicates that officials are deciding whether to advance a proposal prior to the 2012 elections. Proposals to maintain a large government role could include a restructuring of the GSEs or replacing them with successors that would have mortgage-backed securities guaranteed in exchange for a fee.
Wolin responded that the Posts assumption that the administration is considering a single proposal is a factual error. He stated that the President has called on his housing finance reform team at the White House, along with the Treasury Department, and the Department of Housing and Urban Development, to continue analyzing each of the options laid out in the Administration’s report to Congress.
"Today, our focus must be on both healing a still-struggling housing market and taking the steps necessary to bring private capital back into the housing market," he wrote. "The principles we have laid out will help lead to a future system with more private capital, more oversight, and less risk to the taxpayer – in short, to a healthier, more stable system of housing finance."