The Hill: On the Money Blog: Geithner takes fire from Democrats on housing plan

March 2, 2011

By Peter Schroeder

Treasury Secretary Timothy Geithner found few Democratic allies on the House Financial Services Committee Tuesday, as the administration's report on housing finance found more critics on the left than the right.

Geithner came to Capitol Hill to mount the first public defense of the administration's housing report, which was released Feb. 11.

However, the secretary found himself fending off feisty questions from both sides of the aisle, as Republicans pushed for a wholly private housing finance system while Democrats fretted over lost access to mortgages for non-wealthy borrowers.

The administration's housing report laid out three options for how to reform the nation's housing finance system, but drew clear lines in the sand on several points.

The report echoed several items that had been Republican calling cards in the housing debate. It made clear that any way forward involved the eventual winding down of Fannie Mae and Freddie Mac, and the major re-entry of the private market into the housing finance market.

And in his testimony, Geithner kept up the trend, complaining that current government support for housing distorted the market, created a major moral hazard and ultimately left taxpayers on the hook for most of the market's risk.

In his prepared opening statement, committee Chairman Spencer Bachus (R-Ala.) hit many of the same notes, saying reform should have as the "ultimate goal a system based on private capital, not taxpayer subsidies."

While also quick to point out that Republicans had been pushing for years for many of the administration's suggestions, Bachus nonetheless struck a positive tone about the report.

"House Republicans are ready and willing to sit down with you, Mr. Secretary," he said.

Geithner also made clear in his testimony that the administration wants to work with House Republicans, and not try and wait for another Democratic majority. He set a goal of passing comprehensive legislation reforming the housing finance system by the conclusion of the 112th Congress at the end of 2012.

Any delay would "exacerbate market uncertainty and risk leaving many of the flaws in the market that brought us to this point in the first place unaddressed," he said.

Other Republicans were less genteel. Rep. Jeb Hensarling (Texas) accused the administration of doddering on housing finance, and Rep. Scott Garrett (N.J.) jabbed the report for being "light on specifics" and lacking in a "concrete position."

But Geithner didn't find much relief from Democratic lawmakers, as their support for the administration's proposals could be called tepid at best.

Rep. Maxine Waters (D-Calif.), said in her prepared statement that the report was a good starting point, but that she by no means agreed with all its proposals.

A major push to privatize the housing market could have "disastrous and unintended side effects," she cautioned.

Continued access to affordable housing was an overarching concern of many Democrats, sprinkled with skepticism that the private market could provide comparable access to credit.

Rep. David Scott (D-Ga.), said he was concerned that the administration was overestimating the ability of private capital to replace the government's role in the mortgage market.

He also took the administration to task for failing to provide a specific proposal for supporting rental housing, despite noting in its report that home-ownership is not for everyone and that rental housing should be a viable alternative.

"If there is no guarantee that will happen, how is this option viable?" he asked.

Rep. Mel Watt (D-N.C.) accused the administration of skirting the issue of affordable housing.

"I found one sentence in the whole report that holds out hope for low [and] moderate-income people to be homeowners," he said.

Geithner maintained that affordable housing assistance was "central" to any of the administration's proposals.

Rep. Michael Capuano (D-Mass.) openly worried that the administration's reform effort could make houses inaccessible to younger people living in pricey areas.

"I'm not interested in pulling up the ladder because I got lucky enough to get my house," he said. "I want them to be able to afford a home some day."

The cautionary, defensive tone adopted by panel Democrats was not lost on their fellow Republicans.

"I find it odd that I am defending the current administration on so many fronts from his own party," said Garrett.

In his opening statement, ranking member Rep. Barney Frank (D-Mass.) ignored the administration's report altogether, instead focusing his efforts on again lambasting Republicans. He argued, as he had in the past, that House Republicans were suffering from "legislative forgetfulness." After pushing a housing reform bill while in the minority, he accused Republicans of waffling on the issue in the majority, having failed to introduce similar legislation yet.

"This is a harder issue to deal with than the majority thought," he said. To make clear that such legislation did exist, Frank went so far as to have a staffer hand out copies of the bill Republicans pushed in the last Congress to reporters.

Despite Tuesday's common ground, clear points of difference still exist between the Obama administration and Republicans on the housing front. The administration was adamant in its report that the government must play some part, albeit dramatically curtailed from its current role.

For their part, two days after Tuesday's hearing, committee Republicans are expected to pass legislation that would kill four of the administration's housing

Issues: Housing