The Fannie Fandango Begins.

Soon-to-be House Oversight Committee Chairman Darrell Issa's savvy communications staff strikes again; Politico recently "obtained" a list of the Congressman's widely-anticipated investigations, set to kick off when he officially takes over his committee this week. While most of the agenda won't surprise -- subjects set for scrutiny include Wikileaks' release of documents and "how overregulation has hurt job creation" -- I wanted to draw attention to this:

Issa is also pushing a broad investigation of the foreclosure crisis, but he wants to dig deeper into the role of Fannie Mae and Freddie Mac – conservatives have long complained that these government-backed housing giants have escaped scrutiny. The committee will also dig into the administration’s foreclosure mitigation program, calling the Federal Housing Administration’s chief and non-government experts. Issa and Cummings have agreed that foreclosures should be the topic of one of the committee’s first hearings.

The article also mentions that Issa wants to have a hearing on the Financial Crisis Inquiry Commission's inability to come to a bipartisan consensus on what happened to the country in 2008. But we already know why they failed: Republican commissioners pre-emptively released a minority report blaming Fannie Mae and Freddie Mac for the crisis, one so devoid of substance or reasoning that it lead to this epic smackdown from Joe Nocera.

The plain fact is that it's hard to make compelling case that Fannie Mae and Freddie Mac were at the center of the crisis, and that's not for lack of looking by a variety of experts. But Republicans really want to make that case for political reasons (Democrats traditionally reaped much of the political gains from a bipartisan desire to subsidize housing) and ideological (blaming the government rather than the market). We already saw the administration's scene-setting for this debate, and now it appears Issa will craft the House GOP's response.

The problem is that Fannie and Freddie are, together, currently backstopping most of our housing market. While they are in need of serious reform -- and reform that could be very bipartisan indeed, based on something like Raj Dates' progressive plan to eliminate the institutions entirely -- the political calculus Republicans are setting up will make compromise difficult and could have potentially destabilizing effects on housing prices. Our economic challenges will be worse if Fannie and Freddie reform efforts become caught in the middle of the different-yet-related debate over ameliorating the current foreclosure crisis -- mixing together two politically controversial, expensive and complex policy issues promises grid-lock.

-- Tim Fernholz

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