WASHINGTON – (RealEstateRama) — Financial Services Committee Chairman Jeb Hensarling (R-TX) gave the following statement following the Federal Housing Finance Agency’s principal reduction announcement:
As Yogi Berra once famously said, “It’s déjà vu all over again.” Memories are clearly short among Washington’s ruling elite because they continue repeating the same mistakes that caused the 2008 financial crisis in the first place.
Contrary to the fable told by the Left, the root cause of the financial crisis was not deregulation but dumb regulation. Regulations and statutes that ultimately put people in homes they could not afford to keep and led to the bailout of Fannie Mae and Freddie Mac, the biggest taxpayer-funded bailout in history. We need to build a sustainable housing finance system that protects both homeowners and taxpayers. But instead, the FHFA is helping Washington roll the dice again with another scheme founded on perverse incentives. Principal reductions exacerbate the same moral hazard problems that left taxpayers holding the bag for the government’s failures.Further, the FHFA itself previously warned us that principal reduction would be very costly for taxpayers, who already have spent hundreds of billions to bail out Fannie and Freddie.
The best foreclosure prevention program ever conceived by the mind of man is a good-paying job created by a healthy, growing economy, not more Washington housing schemes. It’s time to get off the boom-bust-bailout cycle so working families have greater economic opportunity to achieve financial independence and buy a home they can actually afford to keep.