This speech is a lot better than I expected. I spent the time reading it, hoping to tear it apart. Unfortunately, the best I can muster is “Geithner: Solving Yesterday’s Problems Tomorrow.” That’s not the whole story, though. The testimony covers most of the problems with the GSEs. But most of the necessary reforms will get nothing but lip service because they would have the consequence of causing home values to plummet. Homes are still not affordable. The government can admit to this, but can’t face a possible future where housing prices drop to levels that are affordable. From the speech:

Vacant and foreclosed homes have a debilitating effect on neighborhoods and can lead to reduced property values, blight, and neighborhood decay. Studies have shown that spousal relationships, family unity, child behavior and academic performance all suffer in connection with home foreclosure. Furthermore, the lost stability of the ownership of a home and the stigma associated with home foreclosure in America is significant and can make recovering from a lost job, a divorce, an expensive medical event or another shock to an individual or family much harder. The housing crisis cannot be measured only in numbers and dollars, but must also take into account the real impact to Americans who are working hard to provide a better life for themselves and their families.

That’s a window to the problems faced by making the necessary tough decisions. That’s not politically feasible.

The GSEs will eventually be reformed, either as government agencies or as private agencies (the testimony declares a goal to move toward the latter). Neither path will provide a solution to the problems facing housing right now because neither path will be open to the possibility of housing prices falling to affordable levels.