Canada's government-financing operation looks superior to the one in the United States in candor, as well as credit performance, as it achieves equivalent home ownership levels.

Treasury Secretary Timothy Geithner has said that the administration wants to bring private capital back to the housing finance market. But without reopening Dodd-Frank and reigning in the Federal Housing Administrations (FHA), winding down government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac will not be enough to allow the private market to return

In considering whether the government should back housing finance, the first consideration this committee should have in mind is whether it would be good policy at this time to add to the U.S. government’s financial obligations.

The fat years of the housing bubble lasted from 1999 to 2006 - seven years. The bubble was deflating by the beginning of 2007 and collapsed into the panics of 2007-09. Since then we have been struggling in its deflated wake. If we get the Biblical sum of seven lean years, the housing and related debt markets will bottom in 2013 - not a bad forecast. 

AEI's housing finance reform plan provides the opportunity for a possible bi-partisan solution that could result in true reform of our housing finance market.

In less than twenty-five years, government “affordable housing” and other housing policies have turned a healthy market into a financial ruin. Until Fannie and Freddie’s market dominance and the government’s role in the housing finance system are substantially reduced or eliminated, the United States will continue to have an inferior and unstable housing market.

Under the Dodd-Frank financial-reform law, large nonbank firms may be declared systemically important because their failure will cause a systemic breakdown. In effect, this amounts to a government statement that these firms are too big to fail.

Last week, the Administration released its eagerly awaited report on reforming the housing finance market. The Dodd-Frank Act had omitted consideration of the government sponsored enterprises (Fannie Mae and Freddie Mac) because they were perceived to be sufficiently important to warrant separate consideration.