AFP Responds to Obama Housing Finance Policy
Corker-Warner approach is flawed; will repeat the cycle of market distortion
Arlington, VA – Americans for Prosperity (AFP), the nation’s premier free market grassroots advocacy organization, released the following comments in response to President Obama’s statement on housing finance policy:
Americans for Prosperity Director of Policy James Valvo:
“It’s good to see that the President acknowledges that Fannie and Freddie are part of the problem with housing finance in this country. Over the past decade it has become painfully clear that political meddling in the housing sector led to an overinvestment bubble that burst in 2008, dragging much of the economy down with it. Fannie and Freddie played a major role in that debacle and should be wound down in a deliberate and responsible manner. AFP applauds the President for supporting such an approach.
“Even more critical than eliminating Fannie and Freddie is what comes next. The President’s support of the Corker-Warner approach that would create another form of government-sponsored enterprise is badly flawed. It is a small step in the right direction to require private investors to take the first small hit before government steps in to bail out failed mortgage investments with taxpayer dollars. However, a proposal that maintains implied or express government backing will only repeat the same cycle of market distortion, artificially low mortgage interest rates, overinvestment and eventually collapse. AFP urges to the President and Congress to reject such a failed approach.
“Those who fail to learn from history are doomed to repeat it. As the President discusses housing finance reform, we should all learn from the Fannie and Freddie failures, not repeat them.”