Huntsman Proposes RTC-Style Approach To GSE Reform

Huntsman Proposes RTC-Style Approach To GSE Reform Republican presidential contender Jon Huntsman is recommending a Resolution Trust Corp. (RTC)-style solution for the dismantling of Fannie Mae and Freddie Mac.

As part of Huntsman's newly announced proposals for financial services reform, he is calling for a new entity that would wind down the government-sponsored enterprises (GSEs) in a manner similar to how the RTC resolved the savings and loan crisis of the late 1980s. The Huntsman campaign states that the dismantling of the GSEs would be accomplished in a ‘somewhat longer’ timeline than the six years required by the RTC to resolve its crisis.

However, Huntsman argues that the federal government cannot completely withdraw from the secondary market. According to his campaign website, he argues, ‘Pure privatization would result in new systemically risky, too-big-to-fail private sector institutions.’

Huntsman, who is a former governor of Utah and former U.S. ambassador to China, is campaigning for the end of the too-big-to-fail approach to the financial services industry, noting that ‘capitalism without failure is not capitalism.’ He also calls for a realignment of the interaction between the federal government and the private sector and their respective roles in the housing finance market.

‘Real financial reform requires breaking the cozy relationship between Wall Street and Washington that helped fuel the housing bubble, drove a series of bailouts, and prevented meaningful reform in the aftermath of the financial crisis,’ says Huntsman. ‘This cannot mean that the government plays a larger role in allocating credit. We need the market to work efficiently without the kinds of subsidies that encourage a buildup in dangerous amounts of borrowing and leverage anywhere in the economy.’

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