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Friends,
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Last week I had the privilege of testifying before the House Committee on Financial Services on the important topic of reforming the framework for financing homes in America. The hearing was called by Chairman Barney Frank (D-MA) to discuss what the role of Fannie Mae and Freddie Mac should be in the future.
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In my testimony, I argue that Fannie and Freddie were key players in the creation of the housing bubble and their existence distorts the price of homes. Their continued existence threatens a sustainable housing recovery, since they are propping up housing prices, and skewing supply and demand signals in the marketplace.
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In my verbal testimony I argue that Congress should focus on fostering a sustainable recovery by starting the process of ending Fannie and Freddie now, rather than waiting for a recovery to take hold, because any such recovery would be totally dependent on the government and taxpayers and would only create another bubble that would crash in the future. I also point out that any future government programs—whether the continued bailing out of financial institutions such as Fannie and Freddie, or programs like the first-time homebuyers credit—are only going to make recovery harder because they create artificial prices that will not last.
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As I answered in questioning from Rep. Cleaver, my view is that we should be willing to exchange short-term pain from reforming the housing market today for a sustainable, healthy housing market in the future, rather than just kicking the can down the road only to deal with another crash 5 to 15 years from now.
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Here is a link to a video of the hearing: http://reason.tv/video/show/1158
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The Reason.tv video department edited this so it includes just my testimony and some of the Q&A afterwards from the Congressional members of the committee. The video is approximately 10 minutes long, and it doesn’t include all of the Q&A because of some missing sound in areas. But this version is much shorter than the whole three hour hearing (which is available online at the Financial Services Committee website). Warning: the video and sound quality are poor. This is because C-SPAN sent its cameras to cover Obama and Bernanke events that day, and the video feed is just from a wall mounted C-SPAN 3 Online camera. I apologize we couldn’t get better quality.
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More information on what I think should be done about Fannie Mae and Freddie Mac can be found here: http://xrl.us/bhioyp
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Let me know if you have any questions on this issue... especially if you think I am wrong.
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Best,
Anthony Randazzo
Director of Economic Research, Reason Foundation
http://anthonyrandazzo.com |
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