As the former secretary of housing for President George H.W. Bush, I recognize that one of the best ways to combat poverty and help encourage more Americans to rise up the economic ladder is through home ownership. I also know that homeownership will play a pivotal role in the Gulf States' recovery from Hurricanes Katrina and Rita.
Unfortunately, the storms struck just as Congress is debating the future of the secondary mortgage market and considering legislation that could hinder the ability of families in the Gulf States - and communities nationwide - to build wealth through homeownership and access to affordable housing.
Congress created Fannie Mae and Freddie Mac decades ago as private-sector companies with an important public mission: to help ensure that lenders always have money available for home buyers. These government-sponsored enterprises (GSEs) have proven hugely successful in providing liquidity and innovation to the mortgage market.
In good times, the GSEs make homeownership more accessible for millions of families seeking affordable housing. In bad times like Hurricanes Katrina and Rita, the GSEs help provide a stabilizing force in the market, effectively serving as a shock absorber for the entire housing finance system.
In response to the devastation of the hurricanes, the GSEs not only donated millions of dollars in relief, they also stopped collecting mortgage payments for homeowners in affected areas for at least three months. Freddie Mac recently committed to finance up to $1 billion in below-market mortgages by purchasing state and local mortgage bonds in the Gulf region.
Unfortunately, this kind of stability may be harder to achieve under a Senate bill provision that would stop the GSEs from buying and holding mortgage bonds and other types of mortgage assets in their portfolios. But it's the very presence of those investments that make it possible for the GSEs to help the nation weather tough economic times.
Some in Congress have also suggested placing a user fee on the GSEs' business lines, effectively taxing homeownership to fund spending that the federal government can't afford on its own. Once again, this would tie the GSEs' hands in an emergency.
Congress is absolutely right to pass regulatory remedies following the disclosure of accounting mismanagement at both companies. But the debate has turned partisan and, in some cases, vindictive as some are apparently seeking to punish the companies. It's time to get the debate back on track and consider ways to use the GSEs to further expand homeownership and housing opportunities as weapons against poverty.