WASHINGTON — As Treasury Secretary Tim Geithner heads to the House Financial Services Committee this morning to testify on the White House's housing finance reform plan, observers are hoping some key questions can finally be cleared up:
1) Will Geithner express a preference for a particular approach?
Treasury's options paper, released on Feb. 11, gave three alternatives to replace Fannie Mae and Freddie Mac, but didn't say which one the administration preferred. In brief, the plans ranged from an almost non-existent government role in the mortgage market to a system where the government explicitly backs mortgage-backed securities under certain conditions.
Lawmakers on both sides of the aisle are likely to press Geithner to see if they can get him to at least give a hint of where he stands.
The key word, though, is hint. Geithner is a pro at testifying without signaling how he views the situation. The test will be whether he unintentionally offers some clue.
2) Will House Republicans rally around an approach?
Nearly as important is how the GOP wants to proceed. Last year, it was anxious to prove it was serious about reforming Fannie and Freddie, introducing bills that would unwind the GSEs over the next five years. Since the Republicans took power, however, they've aimed to be a little more cautious.
Rep. Scott Garrett, R-N.J., the chairman of the Financial Services subcommittee with oversight of the GSEs, issued a non-committal statement when the administration released its options paper, suggesting he may be willing to work with Geithner if the administration is serious about a dramatically reduced government role in the market.
So how will Republicans react to Geithner at the witness table? They could use it as an opportunity to try and build consensus for Treasury's option one, which was the closest to complete privatization of the mortgage market. Or they could decide there is more to be gained by treating Geithner as a hostile witness. Either way, their tone and questions will be an important barometer for how the broader GSE debate will move forward.
3) How much name calling will there be?
Anyone who watched the conference committee on the Dodd-Frank bill last year will remember hours spent rehashing whose fault it is that Fannie and Freddie collapsed. Today's hearing runs a serious risk of falling into the same trap.
If Republicans spend most of their time trying to blame Geithner or Democrats for the GSEs' downfall, the hearing is unlikely to be very productive. If they appear open to working with the administration, however, it may signal some hope that housing reform legislation has a chance of passing in the next two years.