By Mary Kissel
The Obama administration announced proposals in February 2011 to wind down taxpayer-backed mortgage giants Fannie Mae and Freddie Mac. But nothing happened, thanks to White House indifference and a few antireform Republicans on key House committees. Two years later, a third agency, the Federal Housing Administration, is teetering on the brink of its first-ever taxpayer bailout. What is to be done?
"We need to move fairly quickly but in a thoughtful manner," says New Jersey Republican Rep. Scott Garrett during a recent visit to The Wall Street Journal editorial board. He emphasizes the word "thoughtful" so as not to scare those who worry Congressional reform could derail the tentative housing recovery. The chairman of the House Capital Markets and Government Sponsored Enterprises subcommittee ticks off a long list of to-dos, including a bill to end Fan and Fred and scrutiny of FHA and the Federal Home Loan Banks. "We have an opportunity to get something accomplished in this two-year cycle," he says.
Mr. Garrett's optimism may be in part due to the new chair of the House Financial Services Committee, Jeb Hensarling, who has made housing reform a priority. But it may be an uphill climb. Republicans lost seats in the House in the 2012 election, and California Republican Gary Miller, a prominent defender of the housing lobby, is now vice chairman of the Financial Services Committee. The smoke signals out of the Obama administration aren't encouraging. Then there's the uncomfortable fact that Fan and Fred are now paying their profits to the Treasury, which makes them an attractive pot of money for Congress to keep around.
Mr. Garrett acknowledges that "comprehensive reform may be a bridge too far," but at least some Republicans are willing to take a stand. Mr. Hensarling announced a "series of hearings" Wednesday focusing on "the financially troubled Federal Housing Administration, the FHA's outsized role in the nation's housing finance system, and the need to create a sustainable mortgage finance system." That's a good start, and an effort House Speaker John Boehner and Majority Leader Eric Cantor should support--loudly and often.