Continuing his nationwide tour to lay out his long-term economic vision, President Obama on Tuesday said it is time to wind down pseudo-government institutions Fannie Mae and Freddie Mac so that the economy never goes through a never housing bubble.
"For too long, these companies were allowed to make big profits buying mortgages, knowing that if their bets went bad, taxpayers would be left holding the bag," Mr. Obama said from Phoenix, Ariz., which the president called "part of Ground Zero for the housing bubble bursting."
Homeownership, Mr. Obama said, "lies at the heart of the American dream" and is the most "tangible cornerstone" of a secure economy. The president in recent weeks has delivered a series of speeches in which he's called on Congress to enact proposals he's already put forward and has laid out new ideas to secure the middle class. While most of his economic proposals are dead-on-arrival in Congress, Mr. Obama on Tuesday praised the Senate for already working on a bipartisan plan to end Fannie and Freddie as they currently exist. He said he supports the effort and laid out his principles for reform.
"First, private capital should take a bigger role in the mortgage market," Mr. Obama said. "I know that sounds confusing to those who call me a socialist -- I saw some posters when I came in -- but I actually believe in the free market... Private lending should be the backbone of the housing market."
The president also called for more security for taxpayers -- companies should not expect bailouts for bad decisions, he said, while simple and safe mortgage products like the 30-year fixed rate mortgage should be protected. The Federal Housing Authority should be strengthened, Mr. Obama said, to keep housing affordable for first-time homebuyers, while local policies should encourage affordable rental housing. Mr. Obama also commended the work of the newly-formed Consumer Financial Protection Bureau for laying out "rules of the road" to keep mortgages understandable.
"That way you know before you owe," the president said.
While the government should ensure another bubble never forms in the housing market, the president said it should take other steps to help homeowners now. He encouraged Congress to adopt his plan to allow homeowners to refinance their mortgages at today's rates and to make it easier for qualified buyers to purchase homes they can afford. Mr. Obama also said that fixing the nation's broken immigration system would help the housing market, as would hiring construction workers to rebuild rundown homes, thereby raising home prices in the surrounding areas.
"If we take the steps we talked about today, I know we will restore not just our home values but also our common values," Mr. Obama said. "We'll make owning a home a symbol of responsibility, not speculation -- a source of security for generations to come, just like it was for my grandparents."
The president delivered his speech at Desert Vista High School in Phoenix, where students sang "Happy Birthday" to him. He turned 52 on Sunday. "I'm now 52, and Michelle says I don't look a day over 51," he joked.