Page 16 - January-February-2018_GSE_Report

FANNIE MAE AND FREDDIE MAC JJAN.U- AFERBY. 22001188
Phillips joined the Treasury in January 2017 to assist the Secretary in a range of matters including domestic nance, domestic nancial institution policy, housing nance policy, and regulatory reform. Previously, Phillips served as a Managing Director and Member of the Global Operating Committee of BlackRock, Inc. from 2008 to 2017. Before joining BlackRock, he held leadership positions at Morgan Stanley and Credit Suisse First Boston, where he managed global securitized product platforms.
“There is certainly a rising drumbeat for administrative action, especially once Watt is gone,” said Chris Whalen, publisher of the Institutional Risk Analyst. (Inside Mortgage Finance, Paul Muolo, 02/23/18, www.treasury.gov; Washington Examiner, Joseph Lawler, 02/23/18)
How can government’s role in the housing market be reduced?
In the 113-page white paper, The Taxpayer Protection Housing Finance Plan Gradually Winding Down Fannie Mae and Freddie Mac and Improving the FHA, the authors—Peter J. Wallison, Edward J. Pinto, Alex J. Pollock, Patrick Lawler, Norbert Michel, Stephen D. Oliner, and Tobias J. Peter—outline a six year process that would slowly phase out the GSEs’ role in housing nance. They wrote:
The following are the major points in this proposal:
It will be dif cult to substantially reduce the government’s dominant role in the US housing nance system through legislation. Given the policy disagreements in the Senate Banking Committee and the Senate generally, it is likely that the outcome—if there is one during the Trump administration—will be either another government-backed system or a stalemate in which no reform occurs.
However, the Trump administration could, through administrative action alone, create a stable housing nance market by (i) eliminating the GSEs over time, (ii) reforming the FHA, and (iii) turning the government-dominated US housing nance system into a predominantly private-sector system based on free market principles.
Steps to reform: In order to accomplish this, we would recommend the following steps, described in more detail in Section IV:
1. Begin a gradual reduction in the conforming loan limits of the GSEs, starting with the elimination of the high-cost area limits in the rst year.
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