Congressman Barney Frank today released the following statement about FHFA Acting Director Edward DeMarco's decision not to allow principal reductions on mortgages backed by Fannie Mae and Freddie Mac:
The refusal by Federal Housing Finance Agency (FHFA) Administrator Edward DeMarco to include the use of principal reduction to help deal with the housing problem that continues to hold back our economy is deeply disappointing. Mr. DeMarco acknowledges that the government sponsored enterprises (GSE) he administers would benefit from principal reduction, but he asserts that because it would have an overall negative effect on the taxpayer, he will impose his view of appropriate overall public policy and reject this effort. But if he is going to take into account broader considerations, certainly the effect on the economy should be included.
Mr. DeMarco says he cannot take this step, which would clearly be helpful in dealing with the drag that housing continues to exert on the economy because of his overall concern for the taxpayer. But the taxpayer suffers greatly from the slow pace of economic growth, and Mr. DeMarco's ideologically-driven refusal to take this important step underlines the damage done to our economy when Senate Republicans blocked President Obama's effort to replace Mr. DeMarco with the widely respected former Bank Commissioner of North Carolina, Joseph Smith.
Mr. DeMarco is the accidental head of the FHFA, kept there by a combination of a statutory restriction on Presidential appointment power and the refusal of Senate Banking Committee Republicans to allow the President to appoint a reasonable head of the agency.
When Mr. DeMarco acknowledges that the GSEs would benefit from principal reduction, but then blocks it on other grounds, while disregarding the negative effects his refusal to act will have on the economy, he makes it clear that we as a nation are paying a price for the Senate Republicans' insistence on protecting him.