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 housing finance reform.
STATEMENT OF SENATOR RICHARD C. SHELBY
Committee on Banking, Housing and Urban Affairs
September 13, 2011
“Thank you, Mr. Chairman.
“Today’s hearing will examine what is probably the most important question for housing finance reform: Can our mortgage market operate efficiently without a government guarantee?
“How the Committee answers this question will dictate how we approach housing finance reform legislation. If the Committee decides that the housing market needs a government guarantee, then it is likely that housing finance reform will be largely a debate over how to structure the guarantee. Reform will be easier, but also less significant because we will essentially be preserving the status quo.
“However, if the Committee decides that the housing market can and should function without a government guarantee, reform will then focus on how to transition to a private market.
In that case, housing finance reform will be a bold undertaking that will fundamentally reshape how this nation finances homeownership.
“While some say there is no need for bold reform, I believe that all options must be on the table.
“Misguided housing policies, pursued by the Federal government and implemented by the GSEs, played a significant role in causing the financial crisis. Therefore, the Committee should determine whether other models of housing finance are more efficient, more sustainable and less likely to impose losses on taxpayers than the current system.
“It is my hope that today’s hearing will help the Committee begin to understand clearly the real benefits and costs of providing a Federal guarantee in housing finance.
“Regrettably, explicit and implicit Federal guarantees were often viewed as ways to subsidize homeownership without incurring a cost to the taxpayer. The implicit “cost-free” guarantee of Fannie Mae and Freddie Mac has already soaked the American taxpayer for over $170 billion. FHFA estimates that the total cost could more than double over the next two years.
“It is clear is that the old way of doing things failed on a massive scale. The question now is whether we have learned anything from the experience.
“Thank you, Mr. Chairman.”