Republicans welcome administration's housing overhaul with a few critiques

The administration’s sweeping report on overhauling the nation’s housing finance system drew nuanced responses from Republicans, who welcomed the plan’s broad strokes while offering smaller critiques and partisan jabs.

The report, released Friday, calls for the winding down of troubled mortgage giants Fannie Mae and Freddie Mac, as well as a shift to a housing finance market dominated by the private sector – moves that had been the calling card of Congressional Republicans for the last few years.

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The debate over Fannie, Freddie, and the nation’s housing system has largely been a partisan issue in recent years. Republicans repeatedly pointed the finger at the government-sponsored enterprises (GSEs) as the primary culprit of the financial crisis, forced to take on risky loans as the government pushed for more affordable housing. And the GOP criticized Democrats during the debate on Wall Street reform for failing to make any changes to the nation’s housing system.

However, the administration’s report, and its push for a overwhelmingly private housing finance system free of Fannie and Freddie, may serve to co-opt some Republican arguments.

Although President Obama maintains he is not moving to the center, the administration has widely been seen as making moderate moves in recent months. By carving out a deal on extending tax cuts in last year’s lame duck session and attempting to win over more of the business community, the administration has begun what some see as new positioning leading up to the 2012 campaign.

Conservatives were quick in their attempts to reclaim the rhetorical high ground following the report, by pointing out that they had suggested several of the administration’s recommendations first, while making relatively minor complaints about the overall package. They also used the report as an opportunity to criticize Congressional Democrats for failing to act on Fannie and Freddie.

Sen. Richard Shelby (R-Ala.) said Friday he was pleased the White House “admits what Congressional Democrats have long denied – that Fannie and Freddie were poorly designed, poorly regulated, and behaved like a government-backed hedge fund.”

However, he took the report to task for lacking “details and any sense of urgency.”

Sen. David Vitter (R-La.) said he was “encouraged” by the report, saying it “stands in stark contrast to earlier proposals made by Senate Democrats.” Vitter is the ranking member of the Senate Banking Committee’s subcommittee on housing.

However, he made clear he was not completely won over, and was waiting for more proof from the White House that they were serious about the proposal.

“I truly hope this new commitment to the taxpayer is real,” he said. “But as we saw in Dodd-Frank, the administration’s legislation never lived up to their talking points.”

House Financial Services Chairman Spencer Bachus (R-Ala.) said he was glad to see the administration report include “several elements of the plan that House Republicans proposed two years ago.”

However, he criticized the White House for failing to offer a single path forward on housing finance. While the report called for the ultimate removal of Fannie and Freddie, it did not offer a definitive take on what system should replace it. Rather, it put forward three options, with varying levels of government input.

Those options led Bachus to dismiss the report as not a real plan, while saying he wanted to find points of agreement with the administration going forward.

“What the administration offered today isn’t a plan to move us forward, but rather a collection of options to consider,” he said. “What’s needed is a real plan, and we intend to sit down with administration officials to find common ground.”

Administration officials defended the multiple choices Friday, saying the Dodd-Frank financial reform law required the executive branch to offer several options, while detailing the pros and cons of each.

And there still may be a few sticking points between the administration and the GOP. While several Republicans have called for the housing finance system to become a wholly private system, the administration rejected that option outright in its report. Rather, it made clear that the government must play a role, however small, in the nation’s housing market going forward.

All three options offered by the administration included some governmental role, ranging from simple assistance to low and moderate-income borrowers, to serving as a catastrophic backstop that could step in to the housing market in the case of another recession.