Treasury Secretary Geithner today appeared before House FinServ to present the Administration’s white paper on housing-finance reform (see Client Report GSE119). He reiterated much in the report, also emphasizing the need for parallel reforms (calling for higher bank capital related to mortgage risk, national servicing standards, a reduction in the GSEs’ loan limit and action on risk-retention regulations). Republicans on the panel were generally supportive of the proposal, although they pushed for quicker action on the “wind-down” part and for more focus on the options that provide the greatest possible role for private capital. Secretary Geithner refused to commit himself to any of the options, noting that each has pros and cons and that true privatization is not viable because of ongoing, if implicit, support for banks and other large providers of private capital in the mortgage market.
As detailed in this report, Secretary Geithner argued against reducing the dividends the GSEs now pay to the Treasury, suggesting that this would perpetuate them. He was open to the idea that, during the wind-down, Fannie and Freddie continue to securitize mortgages but cease to offer a guarantee for these MBS. Chairman Bachus (R-AL) quizzed Mr. Geithner on a pending IRS proposal to force bank reporting on non-resident aliens, but no substantive discussion on it occurred. Mr. Geithner strongly opposed pending GOP plans to terminate government foreclosure-prevention programs.
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