Geitner says Government will Play Active role in the Future of Housing Finance. But still no Plan.

I'm still disappointed that it took so long to address the issues about Fannie and Freddie and the outlook on housing finance. Today, Treasure Secretary Geithner held a conference with notable folks from the department of Housing and Urban Development (HUD) and other experts of the like. His concluding speech was just plain rhetoric, again stating that something needs to be done, but whatever solution comes about, the federal government will continue to guarantee mortgages. I expected a plan, not a re-statement of the issue, but we'll deal with what we have now.

PIMCO's manager, Bill Gross, told Bloomberg News that he proposes a full nationalization of housing finance. Although, I agree with Gross to a certain extent, his proposal lacks substance just like Geithner. I too proposed that the Feds adopt Fannie and Freddie and supervise the mortgage security market that poses such systemic risk. The government can continue to guarantee mortgages; which will provide insurance and encourage affordable lending, but we must also be stern and manage our own risk as the insurer. This means setting guidelines for loans that serve borrowers who meet certain standards - as Fannie and Freddie had in place before the Community Reinvestment Act, thereby alleviating some risk on all parties in the financing scheme. Second, the government should not tolerate any political influence and get rid of the monetary incentives that act as a commission for banks to actively lend; let it be known that taking on the risk through insurance and securitization is enough of an incentive.

Message to the government: enough with the artificial masking, and do your job. Mortgage financing is a great service, but it should in no way blind the public. Decreased lending during bad times makes sense. The heart of the matter lies in the sluggish economy, which goes beyond the housing market, and in my opinion deals more with employment and production. The government has a responsibility to provide economic support to bring a healthy pool of borrowers into fruition so that bankers will realize that the new found beauty in their risk calculations and lend with the backdrop of government guarantees through a securitized insurance pool.

Currently, we must pay the price of our mistakes, but building a system that recognizes these faults is a must. The financial reform bill has done that, and I'm still waiting to see a solid plan for the housing market.