WASHINGTON (Reuters) - A think tank with close ties to the Obama administration is set to unveil a proposal on Thursday on restructuring the U.S. housing finance system and is expected to recommend government backing for mortgages.
The plan from the Center for American Progress will flesh out a blueprint for a revamp of the $11 trillion U.S. mortgage market first unveiled in 2009. It will be published just weeks before the Obama administration is set to release its own proposals.
The left-leaning think tank has advocated for the creation of a replacement structure for Fannie Mae and Freddie Mac, the two mortgage finance giants seized by the Bush administration in 2008.
Fannie Mae and Freddie Mac have received more than $150 billion in taxpayer aid since being taken over by the government. There is widespread agreement their hybrid structure--which allowed shareholders to profit in good times and left the government holding the bag when things went south--is not sustainable.
The plan follows on the heels of an opposing view from the conservative American Enterprise Institute, which last week proposed eliminating the government’s role in the U.S. mortgage market.
Republicans have long argued the two firms need to be privatized. Texas Representative Jeb Hensarling, the fourth highest Republican in the House, last week said he plans to reintroduce legislation to wind down the two firms within five years.
Democrats and the mortgage industry, on the other hand, want to make sure there is government backing for the mortgage market. One idea has been to set up an insurance fund, paid for the by the industry, to make sure taxpayers are not on the hook when mortgages go bad in times of financial stress.
Treasury Secretary Timothy Geithner said last summer there was a “strong case to be made for a carefully designed guarantee in a reformed system with the objective of providing a measure of stability in access to mortgage finance even in future economic downturns.” However, he has offered no specifics on the administration’s thinking.
CAP’s recommendations are closely watched by housing industry players. Its president and founder, John Podesta, was in charge of the Obama transition operation in late 2008 and was White House chief of staff under Bill Clinton.
Reporting by Corbett B. Daly; Editing by Andrew Hay