Thursday, September 27, 2012

Mitt Romney's Housing Policy

Matt Yglesias looks at Mitt Romney's proposals to cure the nation's housing issues.  His takeaway: "Romney’s housing plan is depressing. Faced with a clear policy area in which Obama has not succeeded, his opponent came out with a seven-page white paper so embarrassing the campaign dropped it on a Friday night."  On the specifics, Yglesias argues:

In terms of something the parties actually disagree about, Romney proposes to replace the Dodd-Frank Act with “sensible regulation.” If we repeal Dodd-Frank and its tools for orderly liquidation, what would we do instead? Well, the last plank of the Romney plan argues that “the Romney-Ryan plan will completely end ‘too-big-to-fail’ by reforming the GSEs,” i.e. Fannie Mae and Freddie Mac.

This is a real head-scratcher. Not only does Romney not say how he would reform Fannie and Freddie, he doesn’t even begin to try to explain how this would end the “too-big-to-fail” dilemma—presumably because it wouldn’t. Fannie and Freddie may have exacerbated the extent of the housing bubble, but this has literally no bearing on the question of whether or not the economy can survive the liquidation of a diversified mega-bank. If a bank goes bust under Romney’s plan—what happens? Nobody knows.

Steve Clowney

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