Senate Banking Committee Chairman Says GSE Reform is Unlikely

A key government official indicated in a speech Wednesday that GSE reform is unlikely for the next two years and that Fannie Mae and Freddie Mac will likely remain under conservatorship of the Federal Housing Finance Agency (FHFA) for the time being, according to a report from Bloomberg.

U.S. Senator Richard Shelby (R-Alabama), the chairman of the Senate Banking Committee, said in his speech Wednesday at the U.S. Chamber of Commerce Conference in Washington, D.C., that he would rather leave the two GSEs under control of the FHFA than to replace them with a private insurance company system with a government backstop, as a bi-partisan bill proposed by Bob Corker (R-Tennessee) and Mark Warner (D-Virgina) called for. That bill, S.1217, passed in the Senate Banking Committee by a vote of 13 to 9 last year even though Shelby opposed it. The bill never got a full vote in the Senate, however.

Fannie Mae and Freddie Mac required a combined taxpayer bailout of $188 billion in 2008 after the government seized control of them. The two GSEs returned to profitability in 2012. The future of the two GSEs has been a hotly contested topic in Washington as well as in the rest of the housing industry. Both parties appear to want to wind down the FHFA's conservatorship of the two, but cannot agree on what, if anything, should replace them as well as what role the government should play in housing, if any.

Shelby's sentiments on Wednesday were similar to those expressed in a white paper released earlier in March by the Office of the Inspector General of the FHFA on the future of Fannie Mae and Freddie Mac.

"Absent Congressional action, or a change in FHFA’s current strategy, the conservatorships will go on indefinitely," wrote Acting Deputy Inspector General for Evaluations Kyle Roberts in the white paper. "The Enterprises’ future status is beyond their control. At present, it appears that Congressional action will be needed to define what role, if any, the Enterprises play in the housing finance system."

Shelby said in his speech Wednesday that he had priorities ahead of GSE reform, and that he didn't want to "do something to make it worse than it is," according to the report.