by Ethan Handelman, National Housing Conference
The Senate Banking Committee held a bipartisan hearing Friday to examine the challenges of moving from the current mortgage finance system to the one being developed by the committee. Witnesses and participating senators alike struck a collegial tone in keeping with the other hearings the committee has held on mortgage finance.
Attendance was thin, perhaps due to the timing of a Friday hearing before the Thanksgiving recess. Chairman Johnson (D-SD), Ranking Member Crapo (R-ID), Senator Corker (R-TN) and Senator Warner (D-VA) all participated actively and drew thoughtful answers from the testifying witnesses:
- Mr. James Millstein [view testimony], Chairman and CEO, Millstein & Co.
- Mr. John Bovenzi [view testimony] , Partner, Oliver Wynman
- Dr. Mark Zandi [view testimony], Chief Economist and Cofounder, Moody's Economy.com
- Mr. David Min [view testimony], Assistant Professor of Law, University of California, Irvine School of Law
A recurring theme in the discussion was the choice between a timeline-based transition, which would set a deadline for the wind-down of Fannie Mae and Freddie Mac, and a target-based transition, which would tie the wind-down to achievement of specific objectives around participation of private capital and market functioning. Witnesses were unanimous in support of a target-based approach, citing the many uncertainties surrounding when and how private capital would return and possible exogenous disruptions to the timeline. They also recognized the need for accountability, a point particularly raised by Sen. Crapo, so that the transition would ultimately occur.
Picking up on comments from Prof. Min, Sen. Warner spoke of the importance of rental housing and the proven success of the GSE multifamily businesses even during the crisis. He referenced that much work was being done to fill in the multifamily section of S. 1217. NHC with many allies has called for a multifamily mortgage finance system that builds on the successful Fannie Mae and Freddie Mac multifamily businesses, starting with a transition now to prepare for eventual privatization.
See witness’ written testimony and video of the hearing on the committee web site.