PATH to Conservative Victory
Yesterday, the House Financial Services Committee voted 30 to 27 to advance the Protecting American Taxpayers and Homeowners (PATH) Act (H.R.2767), which would completely dissolve the two housing finance giants, Fannie Mae and Freddie Mac.
As we’ve noted, these two government-sponsored (i.e. taxpayer-backed) entities were largely responsible for the collapse of the financial system in 2008. At that time, Fannie and Freddie received massive taxpayer bailouts totaling roughly $190 billion. They are based on a flawed institutional model that allows them to rake in profits during periods of growth, while leaving taxpayers holding the bill during the bad times.
The PATH Act creates necessary market-based reforms by dissolving Fannie and Freddie, reforming the role of the Federal Housing Administration (FHA) in the Housing finance system, and beginning the establishment of a “U.S. housing finance market free of distortions that this institutional arrangement creates.”
The Financial Services Committee made the right move, and the lawmakers that advanced this solid conservative solution should be applauded. Now, for the sake of taxpayers and homeowners, the whole House should do the same.