Republicans must come to grips with how to overhaul U.S. housing finance if they are serious about ending the government's leading role in the wrecked system, Treasury Secretary Timothy F. Geithner said Tuesday.
Republicans, who now control the U.S. House of Representatives, want to scale back the government's footprint in housing finance and give the private sector a larger role.
With property markets still fragile and 2012 elections looming, the Obama administration wants Republicans to choose among reform options so the problem of home foreclosures and mortgage financing costs doesn't become a festering political issue.
In what amounted to an opening round of talks on how to wind down government-sponsored enterprises Fannie Mae and Freddie Mac, and get the private sector more involved in the $10.6-trillion market that cratered in 2008, Geithner warned that the housing sector was "still in a very difficult state."
"You can't delay indefinitely on legislation defining an ultimate solution," Geithner told a congressional committee. "If you do nothing … in many cases you would re-create Fannie and Freddie."
Geithner testified before the House Financial Services Committee for the first time since the U.S. Treasury unveiled several options Feb. 11 for overhauling the finance system that collapsed in 2008, triggering mass home foreclosures.
Any legislation has to get through a Democratic-controlled Senate after it clears the House. It is likely to be a multiyear effort to complete reforms.
"House Republicans are ready and willing to … work with [the administration] to produce a comprehensive housing finance reform plan — a plan that is based on private capital and protects taxpayers from further losses and future bailouts," Committee Chairman Spencer Bachus (R-Ala.) said.