Fed Officials Push Changes To Housing Policy

The Federal Reserve usually worries about interest rates and inflation. But lately, Fed officials have been focusing on housing. They've been out in public, pushing measures they think will help the housing market. David Wessel, economics editor at The Wall Street Journal, talks to David Greene about proposed changes to mortgage financing.

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DAVID GREENE, BYLINE: Usually when we report of the Federal Reserve, we're talking about interest rates or inflation. But lately Fed officials have been focusing on housing. They've been out in public pushing measures they think will help the housing market.

And to find out why and what they're up to, we turn - as we often do - to David Wessel. He's The Wall Street Journal's economics editor. David, good morning.

DAVID WESSEL: Good morning.

GREENE: So the Fed, have they ever really been involved this much in housing policy before? And what exactly are they trying to do?

WESSEL: Well, housing has always been a big part of the Fed's portfolio because it's so important to the economy. But usually we haven't been in circumstances like this. Fed officials basically have been saying in their speeches and in a 26-page white paper - an usual white paper that Fed sent to Congress - that one reason the economy isn't doing better is that housing isn't healing very fast. The president of the New York Fed, for instance, said it was difficult to achieve a vigorous economic recovery unless the ongoing weakness in housing was addressed. The president of the San Francisco Fed, a new one, John Williams, talked about a housing depression. Basically they're saying we've done what we can to get the economy working better. It would do much better if the rest of the rest of the government paid some attention to getting the housing market going again, the mortgage machinery making - going again.

GREENE: OK. So they're giving speeches. They're sending this big white paper to Congress. But are they actually discussing any firm proposals that they think Congress should take up?

WESSEL: Absolutely. And that's what made this interesting. They're saying that the alphabet soup of programs that the government has tried to help housing, to help homeowners, isn't doing enough and they've come up with a list of things they think the government ought to do. They think the government ought to find a way to reduce the glut of houses for sale, because banks have taken over so many houses, so many foreclosed houses, there's just a glut of supply. They'd like to make it easier for banks and others who own these houses to rent them out, to reduce the number for sale.

They think that more should be done to make sure that the regulators, the lenders, Fannie Mae, Freddie Mac, haven't overreacted to the crisis and are being - they think they're being too stingy, too picking about lenders. The Fed actually said that if mortgages had been this hard to get for the past few decades we might be a nation of renters. And they're looking for alternatives to foreclosure. If someone is not going to be able to pay their loan and the lender is going to take it over, they'd like to speed the process so it's not so cumbersome.

GREENE: Well, Congress is not exactly a place where members enjoy being told how to do their job, typically. I mean how are they reacting to this?

WESSEL: Well, that's a good question, David. Really, the reaction is mixed. There a number of economists - Republican and Democrat - who've been talking about these things. But when the Fed puts out a list to get some attention and Senator Oren Hatch, a senior Republican from Utah in the Senate Finance Committee, he sent a blistering letter to Ben Bernanke, the Fed Chairman, saying that the Fed is treading on the turf of Congress and the regulators and ought to back off. And he said I'm sure that the Fed wouldn't appreciate a white paper from Congress outlining how to think about monetary policy, which was kind of ironic, since members of Congress and Ron Paul running for president don't see any hesitancy to give...

GREENE: They tell people how to do their jobs all the time.

WESSEL: Right. Some people think this is putting pressure on the regulator of Fannie and Freddie to do something more to help the housing market during an election season. The Fed says that's not so. Other people say that maybe what the Fed is doing is giving the regulator some cover here by saying, look, the Fed thinks this is a good idea, it's in the long-term interest of the taxpayers, so we ought to do something here.

GREENE: All right. David Wessel is the economics editor at The Wall Street Journal, and he joins often to talk about the economy. David, thank you.

WESSEL: You're welcome.

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