A coalition of Republican House of Representatives Members has announced a package of bills that would first restrict and then wind down Fannie Mae and and Freddie Mac. The bills and the package of reforms they contain shows how a vigorous, market-oriented House majority can and should actually get things done. Even if they don’t accomplish their overall goals (and they probably won’t), they’re almost sure to make a positive impact on the nation’s housing package.
The bills, nine by my count, would put a variety of new restrictions on Fannie and Freddie, mandate that they shrink, and five years after passage, rescind their GSE charters thus turning them over entirely to the private market. Although there are plenty of details worth quibbling with—one bill, proffered by Rep. David Schweikert (R-AZ) would more-or-less bar the GSEs from offering new products, something that might make it more difficult for them to move towards a truly private future—the overall plan has a lot to recommend it.
This represents good tactics and good strategy: with a number of different bills, many of them with obvious populist appeal, those that want the GSEs to grow forever will have a hard time saying ‘no’ to every single GOP proposal. Likewise, the overall goal of getting the GSEs’ off of the taxpayers’ backs in a gradual, incremental fashion that doesn’t destroy the still fragile housing market is a practical one. This sort of approach—advancing conservative free market goals in bite-size popular, incremental pieces that Democrats will have a hard time voting against—makes a lot more sense than the passing a one-sentence bill to repeal a sitting President’s key legislative achievement.
That said, Republicans probably won’t succeed in accomplishing the goal of truly ending taxpayer liability for mortgages. Since hardly anyone anywhere offers 30-year fixed-rate self-amortizing mortgages with modest down payments absent a government guarantee, a complete privatization of the mortgage market would more-or-less end the widespread availability of these products. Although there’s no reason to believe that anything particularly bad would happen in a world without 30-year mortgages, banks, consumer groups and many members of Congress will put up fierce resistance to efforts to do away with them. Even if Republicans don’t succeed entirely (and, frankly, it’s possible that many of the people proposing the individual bills don’t favor ending 30 year mortgages and the guarantee they require) their reform package is, strategically and tactically, a very good start.