For all the differences among bankers, homebuilders, risk managers, bond buyers, low-income housing advocates, community activists and academic experts at the Treasury Department’s half-day talk-a-thon on the future of housing finance, this was a conference of insiders. If there was one point on display, it was this: an awful lot of people have a stake in keeping things the way they are.
But there was at least one bomb-thrower: Mark Calabria of the libertarian Cato Institute. Calabria, a former top Republican staffer on the Senate Banking Committee, seemed more frustrated by the business executives than the community advocates.
“Two-thirds of these people are from industry,’’ Calabria grumbled during a break in the proceedings. “They all want to make money without taking any of the risk. I mean, why even bother to have lenders if the government is going to take all the risk?”
Calabria is director of “financial regulation studies” at Cato, which is a little like being a wine connoisseur for the Prohibition movement.
Calabria would get the government out of housing almost entirely. He would dismantle Fannie Mae and Freddie Mac – the giant government-sponsored companies that guarantee about two-thirds of the nation’s mortgages. He is against most subsidies for low-income housing. He is pretty much against any government role in the housing market.
That’s a tough order right now. Between Fannie, Freddie, Ginnie Mae and the Federal Housing Administration, some analysts say the government is underwriting as much as 98 percent of all new mortgages.
It’s not because the government wants to dominate the market. It’s mainly because private investors all but dropped out of the mortgage business after the housing bubble imploded.
Calabria would let the chips fall where they may. “We need to align responsibility for both gains and losses,’’ he said. “That should be true for the risks that borrowers take and it should be true for the risks that lenders take.”
It would be an understatement to say Calabria was in the minority at today’s event. Treasury Secretary Tim Geithner had clearly designated Alex Pollack of the American Enterprise Institute as the main champion for dismantling the Fannie Mae and Freddie Mac.
But Pollack, though a fierce critic of the “government-sponsored enterprises,’’ was surprisingly temperate. Though he said he dreamed of a future without Fannie Mae or Freddie Mac, he didn’t push for abolishing them any time soon. And though he insisted that private institutions be responsible for financing middle-class and upper-middle-class homes, Pollack left room for the government to help low-income families.
“You can be a private company or a government agency, one or the other, but you can’t be both,’’ Pollack told the conference.
But almost everybody else at the Treasury today warned that the housing market would suffer immense damage if the government stopped providing guarantees. The real debate was about how explicit to make those guarantees, how much to charge for them and – at least for community groups and labor leaders -- how to channel money into affordable housing.
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