In mid-2011, with the US economy at risk of a new recession, top Federal Reserve officials began to explore a different way to shore up the recovery: looking for fixes for the battered housing market.
But its efforts were being frustrated. With nearly one in four Americans owing more on their mortgages than their homes were worth, millions remained locked out of credit markets and unable to reduce the cost of their loans.
The Fed’s board in Washington gathered a task force of around 30 staff and put them to work far from the public gaze on ways to turn around the worst housing slump in generations. More than six months later, the central bank surprised lawmakers with a string of proposals, including deploying the firepower of the massive US housing finance agencies Fannie Mae and Freddie Mac to help struggling homeowners.
But rather than spurring fresh debate among decision-makers in Washington on how to fix the housing market, the Fed put itself in the sights of Republicans angry at what they saw as election-year meddling, an intrusion on Congress’ turf and a veiled attempt to further the Obama administration’s agenda.
“I was truly taken aback when just recently, as you know, the Fed issued an unsolicited white paper ... on housing policy where, if you didn’t advocate for, you certainly mirrored much of the positions of this administration,” Republican Representative Scott Garrett told Fed chairman Bernanke.