President Barack Obama, dismissing “folks who call me a socialist,” laid out a sweeping plan Tuesday for overhauling the nation’s housing policy by giving private capital a bigger role.
Obama, whose proposals face an uphill fight to passage in the divided Congress, said it was time to wind down the role Fannie Mae and Freddie Mac play in the mortgage market to limit the danger of another devastating bubble — and the risk that it could lead to massive government bailouts.
“Private capital should take a bigger role in the mortgage market. I know that sounds confusing to folks who call me a socialist,” the president said. “But I actually believe in the free market.” (His prepared remarks had invoked “folks who call me a raging socialist every day.”)
And “our housing system should operate where there’s a limited government role, and private lending should be the backbone of the housing market. And that includes, by the way, community-based lenders who view their borrowers not just as a number, but as a neighbor,” Obama said.
The president railed against massive government bailouts like those of Fannie and Freddie, which reaped vast profits in the housing boom — then got taxpayer rescue packages when the bubble burst in 2008.
“We can’t leave taxpayers on the hook for irresponsibility or bad decisions by some of these lenders or Fannie Mae or Freddie Mac,” he said. “We’ve got to encourage the pursuit of profit — but the era of expecting a bailout after you pursue your profit and you don’t manage your risk well, well that puts the whole country at risk. And we’re ending those days. We’re not going to do that anymore.”
As he started his remarks, someone in the crowd at Desert Vista High School shouted out “happy birthday, Mr. President!” and the audience sang “Happy Birthday” to him. Obama, whose birthday was Aug. 4, noted that he was now 52, but “Michelle says I don’t look a day over 51.”
The school is in Phoenix, Ariz., which was particularly hard hit when the housing bubble burst. Obama noted that "the storm hit harder here" as the crisis ripped through the nation's economy. In recent weeks, the White House has cautiously welcomed news that the housing sector is on the mend. There have been hopeful signs in Arizona, though there's a long road ahead.
On Wednesday, Obama is to take part in a roundtable with Zillow CEO Spencer Rascoff, with questions coming from across social media. To ask questions for the roundtable, which will stream live on Yahoo, visit our Homes section here.