The U.S. mortgage finance market is mutating more and more into something that looks like Europe and what is needed is "trust in individual initiatives and in free enterprise" to fix it, said Christopher Whalen of Institutional Risk Analytics on Tuesday. Whalen downgraded the entire U.S. banking sector two weeks ago "for the simple reason there is no revenue." Speaking at HousingWire's REthink Symposium, Whalen said he also maintains a negative outlook on the housing sector, citing a shrinking pool of potential buyers and the absence of the entire nonbank sector. This makes it "very hard to envision how we are going to get a catalyst to allow qualified homebuyers back into the market," according to Whalen. He said stabilization in the mortgage finance sector is largely dependent on "where home prices go." "If we get to the end of the year and the HPI is still flat to down, I think financial institutions will have to start thinking about impairment charges," he said. Whalen said one of the ignored factors of the housing downturn is the role demographics play in booms and busts. "When we are trying to plan for the future, the key thing we have to remember is we are living in a world where we are on the other side of the demographic curve," Whalen said. He traced the country's dependence on debt to build the American dream back to the 1840s, culminating in the World War II generation that spawned the baby boom and a decades-long robust housing market. "The old drivers of growth – spending, and even housing -- started to peter out," Whalen said. "What this led to unfortunately is a whole series of policy moves that were not designed to make structural changes but instead we used debt ... public sector debt to allow us to continue our lifestyles. America wanted, and they wanted it now." Whalen said that mentality led to public policies that fueled the recent crisis. During his speech, he called Dodd-Frank -- the legislation designed to stabilize the housing finance market -- "the faith in bureaucracy act," adding the legislation's burden on the system could be catastrophic. Write to: Kerri Panchuk.