Jon Huntsman President 2012

FINANCIAL
REGULATORY REFORM

Today Fannie and Freddie purchase more than 90 percent of new mortgage originations. This is not evidence of the lack of a private market for loans, but is an illustration of a private sector forced to cede the field due to an inability to compete with state subsidies.

SHUTTING DOWN FANNIE MAE AND FREDDIE MAC

As president, Jon Huntsman will dismantle Fannie Mae and Freddie Mac. Eliminating the GSEs should not be controversial. At its heart, the Panic of 2008 was a crisis born of crony capitalism. It is unconscionable that five years after the start of the housing crisis, these companies have not seen a serious reform proposal and most of their executives are still in power.

Today Fannie and Freddie purchase more than 90 percent of new mortgage originations. This is not evidence of the lack of a private market for loans, but is an illustration of a private sector forced to cede the field due to an inability to compete with state subsidies.

The firms cannot be unwound overnight nor can they simply be privatized. Pure privatization would result in new systemically risky too-big-to-fail private sector institutions. Governor Huntsman’s administration will oversee the creation of a new Resolution Trust Corporation along the lines of what was used to resolve the savings and loan crisis of the 1980s. This reconstituted RTC will sell off Fannie’s and Freddie’s assets. Its predecessor was able to close almost 800 thrifts in six years; the unwinding of Fannie Mae and Freddie Mac should be accomplished in a somewhat longer but similar time frame.

Governor Huntsman will establish genuine competition in this market – with no one having the political or economic power to extract subsidies from the government. At the same time, his administration will ensure there is appropriate and full application of the rule of law within the mortgage sector. The property rights of homeowners must be fully protected under all circumstances. Our market economy is not based on the notion that it is “one set of rules for you” and “another set of rules for the big players.” Credible accusations of legal violations should be investigated fully – whether or not the alleged perpetrators are big banks.

RELATED BLOG POSTS

more posts

RELATED NEWS

more news