WASHINGTON, Mar. 25 -- A group of economists from the American Enterprise Institute (AEI), a renowned Washington-based think tank, said Thursday that the U.S. housing finance market, like other U.S. industries and the housing finance systems in most developed countries, can and should principally function without any direct government financial support.
"A bipartisan agreement on the future of housing finance is possible", AEI experts Edward Pinto, Alex Pollock and Peter Wallison said Thursday at the U.S. National Press Club, where they released a white paper laying out several key principles for keeping the government out of housing finance.
These principles include all programs for assisting low-income families to become homeowners should be on-budget and should limit risks to both homeowners and taxpayers, and Fannie Mae and Freddie Mac should be eliminated as government-sponsored enterprises over time.
In a proposal filed to the Congress on Feb. 14, the Obama administration outlined the government's plan to reform the countries' housing finance system, which are dominated by Fannie and Freddie.
It is widely believed that the government dominated housing finance model was a major cause of this round of financial crisis. The two firms have already received more than 150 billion dollars of taxpayers bailout. Economists hold that the U.S. taxpayers can not afford to continue to rescue them.
"Ensuring mortgage quality and fostering the accumulation of adequate capital behind housing risk can create a robust housing investment market without a government guarantee," noted the white paper, adding that with the gradual winding down of Fannie and Freddie, the private sector can have a bigger say on the market.