The Republican presidential primary has thus far been devoid of ideas on how to address America’s collapsed housing market, as multiple candidates have advocated doing nothing for homeowners who are underwater or in foreclosure. Instead, the candidates have inaccurately focused blame for the crisis on the government and its mortgage giants, Fannie Mae and Freddie Mac.
Former House Speaker Newt Gingrich (R), now the race’s frontrunner, has been among those candidates, despite his past work on behalf of both Fannie Mae and Freddie Mac. But that wasn’t always the case for Gingrich, who in 2007, while working for the mortgage agencies, talked up the importance of government-sponsored enterprises (GSEs) like Fannie and Freddie and their vital roles in filling gaps that neither the government nor the private sector can do efficiently and cost-effectively. Gingrich specifically praised Fannie and Freddie for their role in boosting America’s middle class by making homeownership “accessible and affordable,” telling conservatives they “should embrace” such policies, as Verum Serum reports:
Certainly there is a lot of debate today about the housing GSEs, but I think it is telling that there is strong bipartisan support for maintaining the GSE model in housing. There is not much support for the idea of removing the GSE charters from Freddie Mac and Fannie Mae. And I think it’s clear why. The housing GSEs have made an important contribution to homeownership and the housing finance system. We have a much more liquid and stable housing finance system than we would have without the GSEs. And making homeownership more accessible and affordable is a policy goal I believe conservatives should embrace. Millions of people have entered the middle class through building wealth in their homes, and there is a lot of evidence that homeownership contributes to stable families and communities. These are results I think conservatives should embrace and want to extend as widely as possible. So while we need to improve the regulation of the GSEs, I would be very cautious about fundamentally changing their role or the model itself.
When asked why he took a position on Fannie and Freddie “not normally associated with conservatives,” Gingrich responded by saying he was “more in the Alexander Hamilton-Teddy Roosevelt tradition of conservatism. I recognize that there are times when you need government to help spur private enterprise and economic development. … All of these are examples of government bringing about desired public purposes without creating massive, taxpayer-funded bureaucracies. To me that is a pragmatic and effective conservative approach.”
But now that he is leading presidential primary polls and needs conservative voters who are opposed to Fannie and Freddie, Gingrich is attempting to distance himself from that position. Joe DeSantis, a spokesperson for Gingrich, told the Wall Street Journal that the collapse of the housing market has forced Gingrich to reassess the situation. He now supports overhauling the mortgage giants, DeSantis said:
Mr. DeSantis said that Mr. Gingrich now advocates a more aggressive overhaul of Fannie and Freddie. “The total collapse of the global financial system has a tendency to make one look at a situation with a fresh set of eyes,” he said.
Why Gingrich needs to re-examine his support of Fannie and Freddie, however, is unclear, given that they were not the cause the housing crisis, as conservatives like to claim. In fact, the private mortgage industry triggered the collapse, underwriting more than 84 percent of subprime loans, including 83 percent of such loans that went to moderate- and low-income borrowers. Thus, if Gingrich is truly committed to reassessing the situation, he’ll most likely come to the same conclusion he made in 2007.