Stabilizing the housing market and reforming Fannie Mae and Freddie Mac are two of the great challenges confronting U.S. policymakers.
Sen. Bob Corker (R-Tenn.) has a plan for what he believes will kill two birds with one stone.
Late last year, Sen. Corker introduced a bill, The Residential Mortgage Market Privatization and Standardization Act, designed to "unwind" Fannie Mae and Freddie Mac -- effectively ending the housing market's reliance on government guarantees.
"Three years after the bailout of Fannie Mae and Freddie Mac, we are no closer to transitioning them off government life support than we were the day in 2008 when they came under direct government control," Sen. Corker wrote in a Washington Post op-ed last year. "This is unacceptable."
In a nutshell, his plan calls for lowering Fannie Mae and Freddie Mac guarantees on mortgage-backed securities by 10% per year for 10 years.
At the Milken Institute Global Conference in LA, Corker tells me his proposal is a starting point but that he's having a very hard time finding anyone on the other side of the aisle to negotiate with; six months after it was introduced there has yet to be a hearing on his bill.
"The administration doesn't want to deal with Fannie Mae and Freddie Mac this year," he says. "I think they've instructed the Senate Banking Committee to not deal with the GSEs or any changes to Dodd-Frank. They don't want to do anything to rock the boat."
By his own admission, Sen. Corker's plan would definitely rock the GSEs: "The best way to deal with [Fannie and Freddie] is to reform 'em out of business, but nobody really wants to do that," he says.
Nobody, at least, in the administration which is understandably concerned about the housing market collapsing if Fannie and Freddie were put on a path toward extinction. On the other hand, a situation where the federal government is backstopping over 90% of all new mortgages being written -- and providing unlimited support to Fannie and Freddie -- is unsustainable and uneconomical.
"We got to figure out a way to attract private capital back into the housing market [and] migrate down the guarantees made by the federal government," Sen. Corker says.
Easier said than done, to be sure, but give Sen. Corker some credit for trying to at least begin a dialogue on this issue.
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