There won't be any immediate fix for what ails the nation's housing industry to emerge from Tuesday's big Treasury Department conference exploring potential fixes for the nation's housing-finance sector.
What is clear, at least according to Treasury Secretary Timothy Geithner, is what the Obama Administration won't do as it tries and remake the way housing is financed in the U.S.
An excerpt from Geithner's opening speech:
It is not tenable to leave in place the system we have today.
We will not support returning Fannie and Freddie to the role they played before conservatorship, where they fought to take market share from private competitors while enjoying the privilege of government support.
We will not support a return to the system where private gains are subsidized by taxpayer losses.
Less clear is what should be done, Geithner said. He underscored that by asking a series of questions the financing industry executives and government policymakers need to answer:
What role should the government play to provide stability to the housing finance system, both in times of prosperity and during downturns?
This question is really about whether the government - in order to make sure that Americans can borrow at reasonable interest rates to buy a house even in a downturn - has to provide a form of guarantee or insurance against losses.
Many countries do this, but they do it in very different ways.
Some do it through the banking system, with the array of instruments used to protect banks.
Some do it with specialized mortgage finance companies, with backing from the government.
Some do it with covered bonds, which are bonds issued by banks but backed by individual mortgage loans.
Some make the insurance or guarantees explicit. Many leave them implicit or hidden.
Without such support, the risk is that future recessions could be more severe because the financial system would not have the capital to support mortgage lending on an adequate scale. House price declines could be more acute, with even greater damage to financial wealth and economic security...
... The second question is what role should the government play in providing financial support to improve access to affordable housing?
This is a question Shaun Donovan will touch upon in his remarks and discuss more fully in our second panel. The choices here range from whether we should provide more support or less; whether we should realign our incentives for owning or renting a house; and how we delineate our support for affordable housing from the mechanisms we use for general housing finance.
Geithner's entire speech is worth watching or reading because it provides a useful overview of the administration's latest thinking on the causes of the housing crisis and the potential path forward.