RTTNews - Several top officials discussed the role of the Federal government in the wake of the housing crisis Wednesday, offering their opinions on the future of housing. Speaking at the Federal Reserve Bank of Cleveland's annual Policy Summit, the panelists discussed the best way to reform the regulatory system.

Raphael Bostic, President Barack Obama's nominee for Assistant Secretary for Policy Development and Research at Housing and Urban Development addressed how stabilizing the housing market is necessary for a full economic recovery and offered his opinion on how best to stabilize the market going forward.

Bostic made his suggestions for attacking the regulatory issues that impacted the housing crisis. Although he is yet to be confirmed and was speaking as a citizen, Bostic is likely to play a significant role in the future of housing as a part of the Obama Administration.

We don't use our community based institutions as well as we could.both in terms of providing vehicles and education, Bostic said.

However, even laws designed to prevent predatory lending and other harmful practices might not be enough, Bostic said. Markets are nimble, he noted, and will likely find a way around the laws, making it unlikely that those laws will be enough to ensure consumer protection.

Following his speech, Bostic told reporters that the government is looking to turn what has been the worst recession since the Great Depression into an opportunity to reform the regulatory system.

There are conversations at all levels of government on how we can make lemonade out of lemons, Bostic said.

He said that while the approaches are pretty flexible, increased local involvement - through programs like land banks - would play an important part in dealing with the ruins of the housing crisis.

Allowing local creativity in dealing with foreclosed properties will be an important part of the future programs, Bostic explained.

Joining Bostic on the panel, Susan Wachter of the Wharton School of business in Pennsylvania explained how the foreclosure crisis is similar to a Tsunami.

Wachter noted that there is immediate pain and devastation when it hits and then lasting destruction after it leaves and slides back to sea.

How to restructure the community, whether to wipe it out and start from scratch or try and salvage what is left, is similar to the problems regulators are facing when it comes to the future of the regulatory system, she added.

Peter Skillern, executive director of the Community Reinvestment Association of North Carolina, said that he did not see a complete restructuring of the regulatory system in the wake of the crisis.

Tsunamis where it floods in and floods out, and there is devastation left, he said. We've got to take care of the individuals.

Financial regulatory reform is imperative.the complexity is enormous.and the power of the decision makers is in relatively few hands, Skillern explained.

He called for increased transparency and increased separation from financial institutions and ratings agencies.

When it comes to systemic risk, Skillern called for policymakers to avoid systemic risk.

Financial institutions that might be too big to fail may be too big to exist, he said.

However, Skillern suggested that while a system-wide approach, or macro-prudential regulation would be most desirable, he does not foresee the government making that drastic a change.

I don't believe that there will be major restructuring, he said. I think that what will happen is that we are going to reform what we have.

After his participation in the panel, Skillern told RTTnews that while he believes that officials that have come out in support of macro-prudential regulation, including Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair, are performing well in their positions, the political roadblocks to passing such a major restructuring will prevent the new system-wide approach from taking effect.

I'd like to believe it can be done, Skillern said. But maybe I'm just a cynic.

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