Today, members of the House Financial Services Committee heard testimony from FHA Commissioner Carol Galante and then questioned her closely in a grueling 3-hour hearing. Questions were markedly partisan and at times took a nasty turn, but ultimately the hearing did little to clarify the future of the FHA.
Questions from Republicans on the committee focused on the required capital draw for FHA’s reserve fund, which they termed a “bailout.” Attempts by Commissioner Galante and other committee members to clarify the sometimes subtle differences between on the one hand, the FHA’s appropriation to meet the minimum capital standard required by the actuarial review and, on the other hand, government bailout of private financial institutions owned by private investors, failed to redirect the questioning.
Rhetoric at times overwhelmed both substance and politeness. At various points Republican legislators referred to Commissioner Galante as a “faceless bureaucrat,” questioned her on her health insurance, and compared actions of the federal government in housing to Soviet occupation of Eastern Europe after World War 2. Democrats in response defended the Commissioner and thanked for her public service. They also emphasized the long-standing importance of the FHA in making home loans affordable and available nationwide. They, too, at times strayed onto rhetorical tangents related to the recent government shutdown.
Neither party, however, made much progress in defining a future course for the FHA, which is navigating a difficult path back from the financial crisis. While the recent draw from the Treasury is more of an accounting feature than any kind of actual cash shortfall (FHA has billions on hand), it is a nontrivial reason to think about choices for the future. As we have written about previously, we need a bipartisan, cooperative approach to FHA that makes it more independent, more flexible, and better able to manage risk so that it remains true to its core mission of lending to low-income and first-time homebuyers through up- and down-market cycles.
Watch video replay of the hearing on C-SPAN (http://www.c-span.org/Events/FHA-Commissioner-Testifies-on-Treasury-Bailout/10737442341-1/). The committee’s hearing page has Commissioner Galante’s testimony and the framing statement from the Chair.