Cost of Housing Finance Reform

Efforts to reform the housing finance system have taken on new life. Two pieces of legislation, each with a different vision of the future system, have been drafted in the Senate, the House, and the Obama Administration has recently weighed in on the issues. More legislative efforts are on the way.

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A Budget Battle Postmortem

The 16-day federal shutdown and political brinkmanship around the Treasurydebt ceiling hurt the economy. The hit to fourth quarter real GDP is estimated at $20 billion, equal to half a percentage point of growth. Instead of picking up pace as previously expected, U.S. growth will remain stuck near a lackluster 2%.


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Senate Banking Committee Testimony

Before the Senate Banking Committee

“Housing Finance Reform: Developing a Plan for a Smooth Transition”

November 22, 2013

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Testimony before the Joint Economic Committee

“The Way Forward From Government Shutdown and Debt-Ceiling Confrontation Toward Long-Term Fiscal Sustainability and Economic Growth”

Mark Zandi discusses why the impasse in Washington over funding the federal government and increasing the Treasury debt ceiling is significantly damaging to the economy.

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A Road Map to the New Housing Finance System

Debate is heating up pver the future of the nation’s housing finance system. Much of the back and forth has focused on the system’s end state—whether housing finance should be privatized, retain some form of government backstop, or even remain effectively nationalized as it is today. No matter which goal is chosen, however, reform will not succeed without an effective transition. A clearly articulated plan for getting from here to there is vital; otherwise policymakers will be appropriately reluctant to move down the reform path.

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US Macro Outlook: Nearing the Threshold

  • Reported GDP growth has lagged U.S. job creation, but this unusual discrepancy is unlikely to continue.
  • Weak productivity growth post-recession is part of the explanation, as investment in structures has waned.
  • The revival of homebuilding will help kick the U.S. expansion into a higher gear.
  • Slow household formation has created pent-up demand that could push housing starts well above trend.
  • Lenders are poised to open the credit spigot, if regulatory uncertainties are cleared up soon.
  • The Federal Reserve must carefully handle the normalization of monetary policy to avoid knocking the recovery off track.

The pace of U.S. GDP expansion has flagged in recent quarters, but job growth has held firm. If history is a guide, this discrepancy will not continue for long. Either GDP growth will rebound or job growth will founder. The Moody’s Analytics outlook is predicated on the former view: We think the job market will maintain its pace, and that GDP growth will pick up going into next year. The expansion should be in full swing by 2015.

View the full article here.

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Discussing ADP private sector employment up 200,000 in July with CNBC


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Testimony before the House Financial Services Committee

Mark Zandi addressed the House Committee on Financial Services on July 18th for a hearing entitled, “A Legislative Proposal to Protect American Taxpayers and Homeowners by Creating a Sustainable Housing System”.

Mark Zandi

An archive webcast is available here.

To view the full testimony of Mark Zandi click here.

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A Pragmatic Plan for Housing Finance Reform

Mark Zandi joins coauthors  Ellen Seidman, a senior fellow at the Urban Institute and former director of Treasury’s Office of Thrift Supervision; Phillip Swagel, a senior fellow at the Milken Institute and a former assistant treasury secretary for economic policy; and Sarah Rosen Wartell, president of the Urban Institute and a former deputy director of the White House’s National Economic Council to propose a pragmatic reform of the housing finance system.

“A Pragmatic Plan for Housing Finance Reform” addresses five goals: ensuring system stability and liquidity; ensuring access and equity for borrowers; strengthening affordable housing; limiting the government’s role and risk; and establishing private-sector incentives, competition, and innovation.

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Headwinds Fade, Tailwinds Develop

Dr. Mark M. Zandi discusses the factors that have weighed on the economic recovery, including the housing crash, deleveraging, fiscal drag, and the loss of confidence and heightened uncertainty at the Federal Reserve Bank of San Francisco. Each of these factors will soon become less weighty, suggesting the economic recovery should gain traction as we move to the middle of the decade. To view the transcript and presentation click here.

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