Joe Smith, the Obama administration's nominee for director of the Federal Housing Finance Agency, said Monday that the government should continue playing a role in the mortgage market, but he left the final word to Congress.
In written responses to more than two dozen questions posed by Sen. David Vitter, R-La., Smith acknowledged advantages in having the government play a part in the housing market, citing 30-year mortgage products created during the Great Depression, and he suggested that this support could continue in particular areas.
"Going forward, there are certainly segments of the larger market where the government can make a difference, for example, supporting multifamily rental housing and first-time homebuyers," Smith wrote. "Of course, the ultimate decisions regarding the role of the federal government in housing finance will be up to you in Congress."
Smith, who is the commissioner of banks in North Carolina, dodged questions about what kind of plan the Obama administration is developing for the housing market. He also declined to weigh in on a proposal from some industry groups that would provide for an explicit guaranty of MBS in the event of significant losses in the market.
"If Congress decided to provide for an explicit government guarantee, I believe that they should consider the costs of such a guarantee and who will bear those costs; any guarantee must be appropriately priced to compensate for risk, to cover potential losses," Smith wrote.
He also made clear the importance of the Federal Home Loan Bank System but stopped short of deeming it systemically risky.
"Given the interdependence of the member banks of the Federal Home Loan Bank System and their relationship to community banks, I believe that the Federal Home Loan banks are very important but not necessarily systemically risky," he wrote.