Mar 29 2011

Shelby: Congress Needs to Do Its Homework on Housing Reform

U.S. Senator Richard Shelby, ranking Republican on the Senate Committee on Banking, Housing and Urban Affairs, today made the following statement at a Committee hearing on the consideration of proposals to reform the housing finance system.

Excerpts of Shelby’s statement are immediately below in bold, followed by the full text of his prepared remarks:

 “However, before Congress can consider legislation, this Committee needs to do its homework.  The Committee needs to thoroughly examine Federal housing policy and identify the problems with our current system.  Accordingly, I believe this hearing is premature...

 …Therefore, I propose that the Committee establish a formal process for considering housing finance reform…

 …Unfortunately, the committee failed to follow this course with the Dodd-Frank legislation.  The result was partisan legislation that is full of technical problems and that has had serious adverse unintended consequences.  I hope we do not repeat this mistake with housing finance reform.”

 

STATEMENT OF SENATOR RICHARD C. SHELBY

Committee on Banking, Housing and Urban Affairs

March 29, 2011

“Thank you, Mr. Chairman.

“Today, the Committee will again take up the issue of housing finance reform.  At the Committee’s last hearing, we heard from Treasury Secretary Geithner about the need for reform.  Secretary Geithner noted that our housing market is now entirely dependent on government support.  He warned that private capital will not return until we fix the problems in our private mortgage market.

“He also told the Committee that Congress should therefore pass housing finance reform during this Congress.  I agree with Secretary Geithner that housing finance reform is overdue and should be promptly addressed.  Chairman Johnson has also stated that this is one of his highest priorities.

“However, before Congress can consider legislation, this Committee needs to do its homework.  The Committee needs to thoroughly examine Federal housing policy and identify the problems with our current system.  Accordingly, I believe this hearing is premature.  

“Before we discuss solutions, we should first clearly identify the problems we are trying to solve.  Without that examination, I fear the Committee will again yield to the temptation of picking a solution before it has accurately described the problem.  Legislation should be driven by facts, not by pre-determined outcomes.

“Therefore, I propose that the Committee establish a formal process for considering housing finance reform.  This process should include a series of hearings that are preceded by comprehensive staff work.

“First, the Committee should hold a series of investigative hearings to examine Federal housing policy and our housing finance system.  These hearings would seek to determine what aspects of our system have worked well and should be retained, as well as which aspects should be reformed.  As part of these hearings, the Committee would also examine what caused the failures of Fannie Mae and Freddie Mac.

“The Committee would next gather proposals for reforming our housing finance system from a wide array of interested parties across industry, academia and the public.  The Committee should then commence a second series of hearings examining the costs and benefits of these proposals, directly applying the lessons learned from our first round of hearings.

“Once the Committee has identified the problems and researched the potential solutions, we will be ready for the final phase, which would be legislating.

“I understand that this process would be time consuming and require a great deal of effort.  However, I do not believe the Committee has much choice.  It is the only way to produce legislation on a subject as complex and important as housing finance.

“This process would help educate us on the issues so that we can make informed decisions.  It will also help ensure that any legislation passed is effective and has the fewest unintended consequences.  In addition, this process offers the best chance of forging a bipartisan consensus on how we should proceed. 

“Unfortunately, the Committee failed to follow this course with the Dodd-Frank legislation.  The result was partisan legislation that is full of technical problems and that has had serious adverse unintended consequences.  I hope we do not repeat this mistake with housing finance reform.

“Thank you, Mr. Chairman.”