Page 11 - January-February-2018_GSE_Report

FANNIE MAE AND FREDDIE MAC JJAN.U- AFERBY. 22001188
Urban Institute’s Jim Parrott urged Democrats to seize the moment to back the revised Corker- Warner plan, arguing that it is the party’s best chance to enact meaningful reform that maintains key progressive priorities. “Anyone who thinks that this administration is going to pursue an administrative path that is to the left of where the bipartisan group in the Banking Committee is has utterly lost their minds,” said Parrott. “If this effort falls apart, in a year we’ll have a conservative FHFA director and Trump administration working as aggressively as they can to reduce the government’s role in this market, and anyone who cares about progressive housing policy will regret that we let this moment pass without doing more to help.”
With Senator Bob Corker (R-TN) and Housing Financial Services Chairman Jeb Hensarling (R-TX) having announced their plans to leave Congress at year-end and Watt’s tenure at FHFA to expire in January, many stakeholders view the exit of these key housing policy makers as a pivotal moment to reach a compromise on housing nance reform. “This is our greatest opportunity for a solution that will work for industry, taxpayers, and consumers,” said MBA’s David Stevens, who is scheduled to retire as MBA’s President in October 2018.
Why disrupt the “wildly pro table” housing nance system that works?
PIMCO’s Libby Cantrill, Michael Cudzil, Danield Hyman and Kent Smith argued:
We believe GSE ‘reform’ should simply formalize the current state of affairs— namely, by making the government guarantee explicit and otherwise keeping Fannie and Freddie functioning as they largely are today. In other words, Congress should be honest about conservatorship: It has been and continues to be immensely successful, not to mention wildly pro table, and the current system works.
...The delivery of mortgage credit has never been so ef cient or so fair, nor has the market for MBS ever been so deep, liquid and stable as it has been during the years that Fannie and Freddie have been under conservatorship.
Reform could be simple—and eminently doable. We think policymakers should ask themselves why they are so intent on xing what is clearly not broken. Indeed, with a few tweaks, we believe policymakers could thoughtfully and slowly shrink the government balance sheet and revive the private mortgage market—all while ensuring they don’t disrupt one of the most functional markets in the world.
It’s worth noting that the “wildly pro table” GSEs’s earnings are swept into Treasury’s coffers, providing Congress a backdoor means of generating tax revenues from the housing system. PIMCO is one of the largest participants in the MBS market.
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