Candidates Put Housing Crisis at Fannie and Freddie's Doorstep
Discussion of the housing crisis took up a significant chunk of Wednesday's GOP primary debate, with candidates expressing their views on the sluggish market and how they aim to fix it.
Until Wednesday, housing had been something of a ghost issue this primary season. But with 4 million homeowners delinquent on their loans and about 23 percent of them underwater, candidates were bound to confront the issue sooner or later. CNBC's "Your Money, Your Vote" debate nudged them into doing just that Wednesday.
While detailed proposals were mostly absent from discussion, many of the candidates said that Fannie and Freddie, government-sponsored mortgage-holders who own or guarantee a majority of the country's mortgages, must go.
"I would find a way to unwind Fannie and Freddie Mac such that the marketplace can determine the future of the housing market," said businessman Herman Cain.
"We need to put them back into bankruptcy," added Minnesota Congresswoman Michele Bachmann later in the debate.
During the debate, candidates claimed that the government's hand in the housing market, extended in the form of the two mortgage giants, disrupts natural market forces and leads to doomed-to-fail loans.
Former Massachusetts Gov. Mitt Romney (pictured above right, with Newt Gingrich) reasserted his strong opposition to any government action aimed at fixing the housing crisis, asking rhetorically, should the "federal government go out and buy all the homes in the country?"
"You'll see home prices come back up if we allow this market to work," he said.
Bachmann was particularly critical of Fannie and Freddie, railing against them for continually requesting bailouts that have already run far over $100 billion and could ultimately exceed $200 billion. She also attacked Fannie and Freddie for paying million-dollar bonuses to their executives, calling it "crony capitalism."
Asked about his role as a consultant to Freddie in 2006, when his company was paid $300,000, former Speaker of the House Newt Gingrich said, "I offered them advice on precisely what they didn't do." Gingrich, who said there was a "good case for breaking up" Fannie Mae and Freddie Mac, also denied ever lobbying for them.
While the candidates almost uniformly said that they would halt mainstream mortgage assistance to homeowners, they provided little insight into how they would accomplish the task. For his part, Cain outlined a general plan, saying that he would reduce the scope of Fannie and Freddie and then turn them into private companies.
Republicans have already proposed legislation designed to weaken Fannie and Freddie's dominance in the mortgage market by forcing the organizations, which currently guarantee mortgages at reduced rates in order to foster homeownership, to charge the same guarantee rates as private investors.
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