Backgrounder posted December 21, 2016
A Pathway to Shutting Down the Federal Housing Finance Enterprises
Over the past 80 years, Congress has assembled a system of federal housing finance enterprises (FHFEs), which have led to the long-term deterioration of credit underwriting standards, created moral hazard, and encouraged imprudent risk-taking in the housing finance system. Indeed, beginning with the New Deal–era housing policies of the 1930s, Congress has created an…
Issue Brief posted August 1, 2016
Mortgage Principal Forgiveness Policy Is a Bad Idea
The Federal Housing Finance Agency (FHFA) continues to pivot on mortgage principal forgiveness policy, initiating a new program that would subsidize a permanent reduction of a portion of unpaid mortgage principal owed by homeowners. The mortgage principal forgiveness program would give preference to some homeowners already in the Fannie Mae-guaranteed and Freddie…
Backgrounder posted March 23, 2016
Time to Shut Down the USDA’s Rural Housing Service
The Rural Housing Service (RHS) of the U.S. Department of Agriculture (USDA) is an unnecessary artifact—part of the post–New Deal vision of federal government housing policy. At the RHS’s inception in 1949, the agency was primarily focused on providing rural-development support to farmers and laborers. Today, however, the RHS specifically targets “underserved” rural areas…
Backgrounder posted May 11, 2015
The Federal Housing Administration: What Record of Success?
More than 80 years ago, Congress passed a series of laws that significantly expanded the federal government’s presence in the housing finance system. These federal programs have grown and contributed to an explosion of mortgage debt over the past few decades. Homeownership rates, however, have barely changed since the late 1960s.
The long-term increase in mortgage debt…
Backgrounder posted September 23, 2014
The Economic and Fiscal Effects of Eliminating the Federal Death Tax
The federal estate tax (often referred to as the death tax) is a tax on a person’s lifetime accumulated property. In 2014, the death tax applies a 40 percent tax to all accumulated wealth above $5.34 million. While the death tax applies to relatively few Americans and raises only tiny amounts of revenue for the federal government, it imposes substantial costs on the…
Issue Brief posted August 11, 2014
Five Guiding Principles for Housing Finance Policy: A Free-Market Vision
The two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, remain under government conservatorship with the federal government standing behind all of their obligations. Housing finance reform is likely to be addressed during the next congressional session, but it appears the House and the Senate may offer very different reform proposals.
Backgrounder posted June 18, 2014
Why Is Federal Housing Policy Fixated on 30-Year Fixed-Rate Mortgages?
Robust mortgage financing exists in virtually every developed nation in the world without the degree of government involvement found in the U.S. While the U.S. homeownership rate is about average among developed nations, U.S. citizens typically pay among the highest interest rates in the industrialized world. Still, many groups argue that eliminating the…
Backgrounder posted April 23, 2014
Basel III Capital Standards Do Not Reduce the Too-Big-to-Fail Problem
Many experts recognize that the government will still step in to support some financial institutions rather than allow them to go through bankruptcy. This “too-big-to-fail” doctrine remains at least as prominent now—and as costly to taxpayers—as it was prior to the 2008 crisis, partly because the Dodd–Frank bill exacerbated the problem. For instance, in the…
Issue Brief posted April 18, 2014
Fannie and Freddie 2.0: The Senate Does Not Get the Government Out of the Market
In an effort to reform the nation’s housing finance system, Senate Banking Committee Chairman Tim Johnson (D–SD) and ranking member Mike Crapo (R–ID) have announced that they will hold a markup for their bill on April 29, but many details still have to be ironed out.
Given that close to 100 percent of the U.S. mortgage market is now backed by the federal government, it…
Issue Brief posted April 3, 2014
U.S. Financial Markets Do Not Need a New Regulator: Senate Misses the Mark
Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and both would replace the GSEs with a new…
Issue Brief posted March 27, 2014
Johnson–Crapo Housing Finance Reform Misguided
Senators Tim Johnson (D–SD) and Mike Crapo (R–ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R–TN) and Mark Warner (D–VA) released last June.
Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, but both would also replace the GSEs…
Issue Brief posted February 28, 2014
Chairman Camp’s Tax Reform Plan a Milestone for Dynamic Analysis
House Ways and Means Committee chairman Dave Camp (R–MI) released a plan for comprehensive tax reform. Setting aside its merits, Camp’s proposal is noteworthy on two accounts: (1) It presents the most comprehensive tax reform proposal in decades, and (2) it includes a dynamic estimate from the Joint Committee on Taxation (JCT).
The latter is a long overdue and welcome…
Backgrounder posted February 7, 2014
GSE Reform: The Economic Effects of Eliminating a Government Guarantee in Housing Finance
The U.S. government was barely involved in the housing finance market before the Great Depression. Subsequently, the Federal National Mortgage Association (commonly known as Fannie Mae) and the Federal Housing Administration (FHA) attained an almost legendary status for having “saved” the housing market in the 1930s with various forms of government guarantees. The…