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Obama To Endorse Privatizing Fannie Mae, Freddie Mac
Originally published on Tue August 6, 2013 7:25 pm
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President Obama was back on the road talking about the economy today. Lately, he's been taking a trip or two a week all over the country with a different focus each time. Today, he was talking about housing in Phoenix, where the 2008 crash was louder and more painful than in most places. The president laid out some new proposals to help the housing industry, and he described some old ones too.
NPR's Ari Shapiro joins us here. Hi, Ari.
ARI SHAPIRO, BYLINE: Hi, Audie.
CORNISH: So, first, the basics. How is the housing market doing?
SHAPIRO: Recovering but not recovered. Here are a few of the statistics President Obama rattled off in today's speech. He said home prices are rising their fastest in seven years, sales are up almost 50 percent, constructions up almost 75 percent, foreclosures are down by about two-thirds.
This morning, I spoke to a realtor in the Phoenix area. She told me she was just looking at a chart and that things today are about where they should have been if the boom had never happened and the bust had never happened. So President Obama says now his goal is to unleash the housing market without getting back into that boom and bust cycle again.
CORNISH: So what are some of the headwinds for housing as it makes its way back?
SHAPIRO: One of the biggest ones is that there is not enough lending. People who have perfect credit, or have a lot of money, can get loans for a mortgage. But middle-class people who have good but not great credit, people who in a typical economy would be able to get a loan to buy a house, they're having a hard time. Credit is just a little too tight. And this makes a difference because housing is roughly a fifth of the U.S. economy.
One analyst I spoke to today says if the housing market were where it should be, economic growth could add a whole 'nother percentage point, 1 percent, which, given that current economic growth is about 1.5 percent, an extra 1 percent would really be a lot.
CORNISH: So back to President Obama, what does he suggest in the way of solutions?
SHAPIRO: He laid out a smorgasbord in today's speech. A lot of the ideas are focused on getting more people into homes.
PRESIDENT BARACK OBAMA: We got to give more hardworking Americans the chance to buy their first home. We have to help more responsible homeowners refinance their mortgages because a lot of them still have a spread between the rates they're paying right now on their mortgage and what they could be getting if they were able to refinance.
SHAPIRO: So he also talked about immigration and the need to get the law right to help stabilize housing demand. He talked about getting rid of blighted properties, either rebuilding or tearing them down, which, he says, will also put construction workers back on the job. He talked about ensuring affordable rent. But the top line idea of this speech is winding down Fannie Mae and Freddie Mac. These are the government-sponsored enterprises that back most 30-year fixed rate mortgages in the U.S.
President Obama wants to put private lenders out front on these long-term mortgages and use the government as a sort of backstop. He wants to ensure the mortgages don't go away for middle-class families. He says the private lenders could pay a fee to the government, and that would allow the government to sort of be this insurer of last resort.
CORNISH: Now, Fannie Mae and Freddie Mac have had lots of critics for a very long time. So how popular is this idea of winding them down?
SHAPIRO: Well, in the Senate, there's bipartisan support. There's a bill that's been working its way along, but less so in the House. House Republicans, at least some of them, prefer to get the government out of the mortgage insurance business altogether, have no backstop whatsoever.
CORNISH: So what are the options if this bill doesn't become law?
SHAPIRO: Yeah. There's actually a lot that the White House can do administratively. Before President Obama's speech, I spoke with Housing Secretary Shaun Donovan. He said they want Congress to act, but they are already taking some of these steps. For example, they're lowering the loan limits for Fannie and Freddie, they are shrinking the footprints, they are putting private money out in front. Donovan says, we need Congress to act, we need this bill to pass. But, you know, anyone in Washington knows it's not wise to count on Congress to pass anything nowadays. So Donovan and others in the administration say they're going to do what they can on their own in the meantime.
CORNISH: That's NPR's Ari Shapiro. Ari, thank you.
SHAPIRO: You're welcome.
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