10 September 2003
FRANK: Thank you, Mr. Chairman.
I appreciate hearing from the two Cabinet secretaries, but I just say at the outset that before we move on any legislation, I would hope we would have some additional hearings. And in particular, I think it’s important that the variety of groups in our country who care about housing be invited, because that’s my major focus here, as it’s been during my service on this committee.
I want to begin by saying that I am glad to consider the legislation, but I do not think we are facing any kind of a crisis. That is, in my view, the two government-sponsored enterprises that we’re talking about here, Fannie Mae and Freddie Mac, are not in a crisis. We recently had an accounting problem with Freddie Mac that led to people being dismissed, as appears to be appropriate.
I do not think at this point there is a problem with a threat to the treasury. I’m going to say, we have an interesting example of self-fulfilling prophecy. Some of the critics of Fannie Mae and Freddie Mac say that the problem is is the federal government is obligated to bail-out people who might lose money in connection with them.
I do not believe that we have any such obligation. And as we said that it’s a self-fulfilling prophecy based on people. So let me make it clear: I’m a strong supporter of the role that Fannie Mae and Freddie Mac play in housing. But nobody who invested in them should come looking to me for a nickel, nor anybody else in the federal government.
And if investors take some comfort and want to lend them a little money at less interest rates, because they like this center (ph) affiliation, good, because housing will benefit. But there is no guarantee, there’s no explicit guarantee, there’s no implicit guarantee, there’s no wink-and-nod guarantee. Invest and you’re on your own.
Now, we’ve got a system that I think has worked very well to help housing. The high cost of housing is one of the great social problems in this country. I would rank it second to the inadequacy of our health delivery system as a problem that afflicts many, many Americans. We’ve gotten recent reports about the difficulty here.
Fannie Mae and Freddie Mac have played a very useful role in helping make housing more affordable, both in general, through leveraging the mortgage market, and in particular they have a mission that this Congress has given them, in return for some of the arrangements which were of some benefit to them, to focus on affordable housing. And that’s what I am concerned about here.
I believe that we, as the federal government, have probably done to little, rather than too much, to push them to meet the goals of affordable housing, and they set reasonable goals.
I worry, frankly, that there’s a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. I think that’s a (OFF-MIKE) problem, the federal government doesn’t bail them out.
But the more pressure there is there, then the less I think we see, in terms of affordable housing. I want Fannie Mae and Freddie Mac to continue with its government-sponsored enterprises, with some beneficial arrangements with the federal government, in return for which we get both the general lowering of housing costs and some specific attention to low-income housing.
In particular, I’m concerned right now that there has been and it’s been raised by Fannie Mae, it’s been raised by one of the rating agencies that’s been critical of the federal home loan bank, manufactured housing.
Manufactured housing is a very important housing resource for low and moderate-income people. We talk about increasing home ownership among low and moderate-income people and disproportionately, if you look at the increases in home ownership, it’s come with their ability to get manufactured housing. And I don’t want to see Fannie and Freddie pushed in the direction of being tougher on manufactured housing. And many of us will be in touch with the secretary — Secretary Martinez — to see how we can improve this.
I’ve talked to my colleagues in the Congressional Black Caucus in the blue book. This is a very important and I think somewhat underrated form of housing. Well, I think we now see pressure on it that’s generated in part by exaggerated fears of a financial crisis.
So I’m prepared to look at possibilities here. But I am particular — and this is a major point I want to make — I saw this is in the letter from the home builders — I do not want to see any lessening of our commitment to getting low-income housing. And here’s my concern: If you move the regulator to Treasury and you leave HUD with the mission, I’m not sure that it isn’t mission impossible or at least implausible. What’s going to do, yell at them?
I mean if all of the regulatory authority and all of the clout is over in Treasury, what’s left in HUD? And I notice that the home builders raise that.
So my threshold question is, if you move this regulator to Treasury, if you bifurcate, in terms of the Cabinet departments, the responsibility for the low-income housing mission, including manufactured housing — very important to me, as I said — and other forms of housing, if you bifurcate that, what real strength is there left behind the mission, if most of the regulation and most of the teeth are — if you put all the teeth in Treasury, having HUD gum them into doing more low-income housing doesn’t strike me as the ideal situation.
And that’s why I say, Mr. Chairman, in closing, that as we proceed on this, I would hope we would have a day when groups that are — a range of groups that are concerned with housing could specifically address that. Thank you.