American Dream Wasn’t Always About Housing, Former Treasury Secretary Hank Paulson Says
Sep 12, 2018 — Greg Robb
Former Treasury Secretary Henry Paulson on Tuesday suggested that government policy penalizes renters at the expense of homeowners.
“Renters are disadvantaged relative to homeowners,” Paulson said in a brief interview on the sidelines of a conference at The Brookings Institution on lessons from the financial crisis.
“The American Dream sort of changed over time,” Paulson said during a panel discussion on the future of Fannie Mae and Freddie Mac and housing.
The all-day conference featured panel discussions by former senior staff of the Treasury Department and Federal Reserve who had to combat the housing bubble and the subsequent financial crisis.
“I remember thinking the American Dream was you could come to this country and, based upon your hard work and abilities, you could achieve great success. Suddenly, the American Dream became about home ownership and homes morphed from becoming shelter to becoming an investment vehicle,” he said.
“What’s going to be done to change it?” Paulson asked the panel.
In response, Minneapolis Fed President Neel Kashkari, who was one of Paulson’s top deputies during the crisis, said he would like to see discussion of loan-to-value limits on home loans.
So far, U.S. regulators have shied away from trying to control mortgage lending.
Other countries have adopted such controls. For instance, in the U.K., only a certain percentage of new mortgages can be at multiples higher than 4.5 times a borrowers’ income.
Other former staffers said they were pessimistic that regulators or lawmakers would make any changes to help households.
“Our politics in Washington right now are pushing us toward a set of steps that will make the financial system riskier and make it harder for individual households, and they are putting taxpayers at risk more than they should be,” said Michael Barr, a former Treasury staffer and now a professor of public policy at the University of Michigan’s Gerald R. Ford School of Public Policy.
Barr also said he saw little appetite in Congress to bring Fannie Mae and Freddie Mac out of conservatorship.
“There is no political will to address them. I think the most likely outcome is that they will still be in conservatorship when we next have a conference on the financial crisis,” he said.