Over the past 18 months, the government has taken extraordinary steps to keep the housing market viable. Home sales reversed their four-year descent, and prices stabilized. So far. But it has cost $126 billion to date, and the bill is still growing. What's next? With the Obama administration largely mute on the issue, Congress will hold its first hearing today about how to restructure the mortgage system in the wake of the financial crisis. "Don’t make the American taxpayer responsible for handling speculative situations or bubbles," he said. Rep. Spencher Bachus, ranking Republican on the committee, said in a subsequent CNBC interview that he would prefer government exit the industry entirely. "We need to phase it out over time," he said. "America is about competition and innovation. The federal model simply is not the efficient model." Working out a new system is likely to take years. For the time being, the market is still resting on three government pillars: Fa
nnie, Freddie and the Federal Housing Administration. And even staunch free-market advocates who want to get rid of Fannie and Freddie in the long run agree that the housing recovery remains too fragile for the government to step away anytime soon. "The first priority is we have to keep financing homes, and we don't have a way to do that without Fannie and Freddie," said Peter Wallison, a senior fellow at the conservative American Enterprise Institute. "We have to deal with the realities of where we are today." Since the government took over Fannie and Freddie, Obama officials have given few details on their long-term thinking, apart from saying that they want to delay a legislative proposal until next year.
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Martim Crawford
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