Geithner: U.S. far behind on housing finance reform

by 04 Apr 2012

(Reuters) - The United States is far behind on reforming the country's housing finance system, where the government's mortgage buyers Fannie Mae and Freddie Mac provide funding for the bulk of U.S. home loans, Treasury Secretary Timothy Geithner said on Wednesday.

"The biggest source of unfinished business in the financial reform effort is in the housing finance area," Geithner told the Chicago Economic Club.

The Obama administration has proposed to unwind Fannie Mae and Freddie Mac, which buy mortgages and repackage them as securities for investors. The agencies then guarantee the debt.

But the administration and lawmakers are grappling with how to reduce the government's footprint in the housing market without damaging the economic recovery.

Geithner said Fannie Mae and Freddie Mac were "not a source of systemic risk now," since the U.S. government was forced to bail them out at the height of the financial crisis and has used billions of dollars in taxpayer money to keep them solvent.

"We are much further behind in laying out the future path of reform in the housing finance system and what should replace those institutions," Geithner said, adding that he saw early signs of bipartisan consensus for reforming the housing finance market.

From Reuters

COMMENTS

  • by Howard | 4/4/2012 8:21:03 PM

    Fannie and Freddie need reform to get them back into better risk management. Understand this that if these two institutions are disolved then the 6 major banks will have won final control as the largest 6 banks now control 77% of the banking industry and that includes mortgages. Just walk into a bank and look at the price they post for a 30 year mortgage, it's horrible compared to what a Mortgage Broker can give you...yes I said a Mortgage Broker. Better rates have always been what a broker can get you and know that now the business has is tightly controlled and you have no chance of being taken for high fees. Believe me the banks are trying to finish off the brokers just like fannie and freddie so they will have no competition.

    What you have after the big banks and investment banks poisoned the economy with irresponsible lending programs and their greed and brought the economy the closest to a depression since the depression, is the results of a recession and that is a horrible Real Estate market with little demmand and pricing power. What we are seeing now is hard times mainly from people being laid off and no way to sell. Most of the bad mortgages have been shaken out of the system already and are continuing to be refinanced or foreclosed upon.
    If Fannie and Freddie are disolved then the big banks would be the ones taking the brunt of the next future recession or bad real estate market and we will be seeing the impossible a huge bank that is too big to fail do exactly that...Fail. Recapitalize and reform FNMA & FHLMC as we need them just like AIG is needed to take that risk that gigantic firms, etc need. What we should be doing is dismantling the banks down to about half their size and cutting Goldman Sachs down to about a tenth of its size as well as getting rid of its influence and bad business practices. Only then will we have truer competition which is what is needed and I'm sure the Republicans agree with competition.

  • by cindy | 4/5/2012 9:45:03 AM

    Fannie and Freddie were /are primarily reponsible for the lending meltdown even more so than the banks. They were./are the primary purchasers of mortgage which allow total controll of underwriting standards. Banks underwrite mortgages according to fannie and freddie quidlines so the mortgages can be sold. The sloppy mismanaged industry is primarily Fannie and Freddies responsibility. They were willing to purchase mortgages from the banks and frankly tried to embarrass any entity that was not willing to lend to those who could not aford it . Stated wage earners, stated social security... rediculous underwriting standards which were acceptable and pushed by both Fannie and Freddie. You have used the media to demonize the broker which truely was the least of the problems and the least powerful. You demonished appraisers to the point that the market is again being controled by Fannie and Freddie underwriting standards. Appraisers now know that if the home is undervalued it will be accepted with little hazzel. The market is now controlled by fear to undervalue homes.

    Let the banks fall, let fannie and freddie collapse and the market place will fix itself. Government and Monopolies should stay out of it. When did too big to fail make sense to anyone but big government and monopolies. We, the average joe, pay for all of the games you play resulting in higher taxes, fees, penalties etc. . Enough is enough... failure is an obtion.

  • by blog network | 4/7/2012 6:53:14 AM

    <strong>On My Twitter Feed...</strong>

    Next, I looked at my feed and spotted someone sharing one of the links to this site...

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