Warren: Don’t ‘scapegoat’ affordable housing in reform push
Sen. Elizabeth Warren (D-Mass.) mounted a spirited defense of affordable housing goals Tuesday as she laid out her vision for overhauling the housing market.
In her first public remarks on housing finance reform, Warren laid out her vision for overhauling the system after the subprime meltdown, and emphasized that Congress should ensure mortgages remain affordable across the middle class, calling it the “centerpiece of the American Dream.”
Appearing before the Mortgage Bankers Association, Warren said affordable housing goals, long pointed to by conservatives as a driving force in the creation of the risky mortgages that sunk the system, had nothing to do with the crisis — “not even a little bit.”
“Affordable housing goals have been scapegoated by those who have been itching to get rid of the goals for a long time, but I think it’s time to drop that red herring,” she said, according to prepared remarks.
Warren admitted that Fannie and Freddie made “significant mistakes” in the years leading up to the crisis, driven by a desire to drive up value for shareholders. But she said the bulk of the blame should lie at the feet of private mortgage originators, who began doling out risky mortgages and “making money hand-over-fist,” enticing Fannie and Freddie to begin bringing more and more risk into their portfolios.
As part of any reform effort, Warren said the government should replace the implicit government guarantee previously enjoyed by Fannie and Freddie with an explicit one that ensures that private capital would bear the brunt of any initial losses. She argued there is no “plausible scenario” where a U.S. housing market can thrive without such government backing.
She also said any housing reforms would need to come with sufficient regulations of the marketplace, both to ensure that a slew of dangerous loans do not again flood the marketplace and also to ensure that large financial institutions do not enjoy an unfair advantage that could allow them to further grow and cement their status as “too big to fail.”
Warren offered kind words for a bipartisan bill put forward by her colleagues on the Banking Committee, Sens. Mark Warner (D-Va.) and Bob Corker (R-Tenn.), but added she did not see it as a “perfect bill.”
“Housing finance reform is a complex puzzle, and it will take a lot of work from a lot of people to make sure the pieces fit correctly,” she said.