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American Enterprise Institute Senior Fellow Peter Wallison on why the government should gradually get out of the housing market.
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And Obama trying to help homeowners refinance their mortgages as part of the jobs bill.
Our next guest is shocked that the government is looking to support the housing market further.
After taxpayers -- -- holding the bag for Fannie Mae Freddie Mac.
Joining me now Peter Wallace -- senior fellow at the American Enterprise Institute former member.
Of the Financial Crisis Inquiry Commission He served as president Reagan's White House counsel Peter good to have you with us.
To be here that this idea that that government is going to remain involved in the housing market.
If it's really just a question of how much the government is going to be involved or really is that Peter.
Well that's that certainly and one on the principle questions is whether the government is going to guarantee mortgages as it has done with Fannie Mae and Freddie Mac.
When you think about it we have terrible problems with the debt in the United States.
I did is enormous.
And a government guarantee of the housing market will just increase the debt.
I can't understand why anyone would think this would be that policy well right now that debt is guaranteed by the federal government is it not.
Yes cities and the idea would be to have a new.
Housing policy in which we take the government out of the housing business and leave that to the private sector.
Leaving it to the private sector I mean that would be an extraordinary dislocation for an already just scramble.
Market and a huge part of our as you well -- -- a few years part of our economy.
If this moment in our fragile recovery if we -- so call it that.
It wouldn't be disastrous.
A well you don't want to do it immediately.
What you want to do is do it over a period of time and structuring a plan.
That would make the private market interested in buying mortgages.
Private.
Institutional investors.
Have a lot of interest in buying high quality mortgages and so what the government should be doing what congress should be thinking about.
Is a structure in which they provide high quality mortgages and then we'll find that thirteen trillion dollars.
That fixed income investors have to invest will come into the housing market.
Come into the housing market still not adequate to support the housing market and there is -- how did.
Another added conundrum and all of this isn't there.
It is very hard to exact.
Public policy and political.
And initiatives.
If you're dealing with a private market place.
You can't simply just turn the spigot as you do with Fannie Mae Freddie Mac and now they check.
Yes and that's the good part about a private market.
Because it isn't subject to political control.
And that's what one of the aims I think anyone who would want to get the government that would would have what what's the best idea you've heard.
All of that now we move that public policy issue we've resolved that for the moment to do is pick up our conversation here tonight Peter all the all the fine folks -- -- White House.
What is the single best idea you've heard to date about how to -- drive and sustain a recovery in house.
There you have to examine first of all what are the reasons that we're having so much difficulty and frankly.
I think it's fairly clear.
That the American people.
I'm not at all convinced of two things first of all they don't know which way the economy is -- and we know the reasons board that.
The government -- told us so much I was uncertainty in our call that well placed uncertainty carefully reasoned and certainly.
-- but what is the is there one thing you've heard that you think.
And.
-- housing no there isn't there isn't any as far as I know there is no magic bullet here.
That will get us.
Of thriving housing market again.
Well we have to do is get the government out of it that's my view Lou it and if we can get the government our people agree with you is -- just that the timing couldn't be worse.
Well I -- I agree if we're talking about Fannie Mae and Freddie Mac they have to remain in for a while they should be reduced over time.
And the private market can take it over.
But right now there isn't any any one idea that it's gonna solve this problem.
The problem is that people believe that housing prices are still going to fall because the government.
Is has been trying to keep housing prices up you know as far as that goes on no and what is going to be going into buying home.
They are Peter they -- or whatever the sector of this economy what direction we're talking about in this economy.
It all comes back to the issue I swear -- you it's always comes back to the issue of leadership.
It's extraordinary.
Peter I think -- much for being with us come -- certain -- it also.
