Following up on yesterday's "U.S. House GOP calls for Fannie, Freddie phase out" (FNM; FRE)"'.
U.S. Treasury Secretary Timothy F. Geithner called for an end to the “ambiguity” over the government’s involvement in mortgage finance companies Fannie Mae and Freddie Mac.
“Private gains can no longer be supported by the umbrella of public protection, capital standards must be higher and excessive risk-taking must be appropriately restrained,” Geithner said in testimony to the House Financial Services Committee today.
Geithner said the Treasury Department and the Department of Housing and Urban Development will issue a request for comment by April 15 on how to overhaul the U.S. housing-finance system and its regulatory structure. The government needs to make sure there is “no ambiguity over the status or allowable activities of any private entity which enjoys any benefits or protections from the government,” he said.
At the same time, Geithner pledged that the Obama administration would seek to avoid disruptions in the market for Fannie Mae and Freddie Mac’s debt and mortgage-backed securities. He said investors should not doubt the U.S. government’s commitment to backstop the obligations of the two companies, which have been in conservatorship since 2008.
“It should be clear that the government is committed to ensuring that the GSEs have sufficient capital to perform under any guarantees issued now or in the future and the ability to meet any of their debt obligations,” Geithner said. “The administration will take care not to pursue policies or reforms in a way that would threaten to disrupt the function or liquidity of these securities or the ability of the GSEs to honor their obligations.”
Geithner told lawmakers that it would be a mistake to either abolish or fully nationalize Fannie and Freddie. He said the government instead needs a new housing finance system in which “we preserve the good but end what was too risky.”
Crafting an overhaul plan that has enough support to pass Congress should take months, not years, Geithner said. He said there’s a “good” case to be made for some kind of government guarantee or support accompanied by more closely monitored and curtailed risk-taking....MUCH MORE
Here's the prepared testimony of the witnesses:
Witness List & Prepared Testimony:
- The Honorable Timothy F. Geithner, Secretary, U.S. Department of the
- Ms. Sarah Rosen Wartell, Executive Vice President, Center for American
- Mr. Michael Berman, President and Chief Executive Officer, CWCapital, on
behalf of Mortgage Bankers Association
- Mr. Mark A. Calabria, Ph.D., Director, Financial Regulation Studies, Cato
- Mr. Vincent O’Donnell, Vice President, Affordable Housing Preservation
Initiative, Local Initiatives Support Corporation (LISC)
- Mr. Robert E. DeWitt, President, Chief Executive Officer, and Vice Chairman,
GID Investment Advisers LLC, on behalf of National Multi-Housing Council
- Ms. Janis Bowdler, Deputy Director, Wealth-Building Policy Project, National
Council of La Raza
- Mr. Anthony Sanders, Distinguished Professor of Real Estate Finance, School of
Management, George Mason University
- Mr. Vince Malta, Vice President and Liaison to Government Affairs, National
Association of Realtors
Available Member Statements: Congressman Kanjorski