Why has Congress left housing to Fannie Mae and Freddie Mac?

In the wake of the Federal Housing Finance Agency’s announcement on Monday that it will merge some operations for Freddie Mac and Fannie Mae, Wonkblog’s Neil Irwin in a blog post questions why there has not been legislative action for a broader overhaul of the U.S. housing finance system. Irwin discusses the government’s role in housing finance and notes that reform is necessary so taxpayers are not “on the hook for everyone who wants a place to live.” In a recent Hamilton Project paper, “Increasing the Role of the Private Sector in Housing Finance,” Phillip Swagel of the University of Maryland proposes reforms of the U.S. housing finance system to increase the role of private capital in funding housing, reduce taxpayer exposure to housing risk, sell off the government stakes in the mortgage finance firms of Fannie Mae and Freddie Mac, and charge appropriate premiums for secondary insurance provided by the U.S. government on housing securities. Read the full proposal here.