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Lawmakers Clash over Means of Implementing GSE Reform
Posted By Carrie Bay On April 5, 2011 @ 7:32 pm In Government,Secondary Market | No Comments
The House Subcommittee on Capital Markets and Government Sponsored Enterprises convened Tuesday to mark-up eight bills aimed at winding down ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mac"":http://www.freddiemac.com. While lawmakers agree that reform is needed, they were divided on just how to proceed with the medley of individual bills in front of them.[IMAGE]
The ""eight proposals include"":http://www.dsnews.com/articles/house-republicans-introduce-8-bills-to-speed-wind-down-of-gses-2011-03-29 provisions that range from raising guarantee fees the GSEs will charge for mortgage-backed securities they insure, to preventing the two mortgage giants from offering any new products while they are in conservatorship, to slashing the pay of Fannie and Freddie's senior executives to bring their compensation in line with the wages of federal banking regulators.
Rep. Spencer Bachus (R-Alabama), chairman of the House Financial Services Committee, has signaled that he plans on moving forward with the piecemeal approach. He told _Reuters_ that a full committee vote on one of the bills introduced by Rep. Jeb Hensarling (R-Texas), which calls for reducing each GSE's portfolio to $25 billion within five years, will come in early May.
""We may let the other bills catch up ... but there is no reason not to vote"" on this individual bill by itself, Bachus told the news agency.
The string of eight separate bills proposed by House Republicans is a conscious effort to pull in Democratic support on individual reforms where a comprehensive bill outlining the full unwinding of Fannie and Freddie might be met with opposition, according to pundits.[COLUMN_BREAK]
According to _Dow Jones Newswires_, the House's assortment of GSE reform legislation could ultimately include as many as 24 bills.
A number of lawmakers, including ranking Democrats, are openly challenging the hodgepodge approach.
_Dow Jones Newswires_ quotes Rep. Barney Frank (D-Massachusetts), ranking member of the House Financial Services Committee, as saying, ""What is this committee doing? Let's stop for a minute and figure out which path we are going to take.""
During Tuesday's mark-up session, Rep. Maxine Waters (D-California) also spoke out against the multiple-bill approach for a single-end-goal.
""I am very concerned about the piecemeal approach being represented by the mark-up of eight small GSE bills today,"" she said. ""[U]ndertaking these short-term steps without a vision for what comes next is a risky strategy, given that the entirety of the American housing finance system is at stakeÃ¢â‚¬Â¦.[T]his scattered approach will send mixed-signals to the market.""
Rep. Waters noted that industry groups with a strong stake in the legislative outcome, including the National Association of Realtors and the National Association of Homebuilders, have cautioned lawmakers to proceed cautiously in deciding the future of the nation's two largest mortgage companies.
House members' counterparts in the Senate are also experiencing some discord on the path being taken when it comes to Fannie and Freddie.
At a Senate Banking Committee hearing last Tuesday on GSE reform, Sen. Richard Shelby (R-Alabama) said, ""[B]efore Congress can consider legislation, this committee needs to do its homework. The committee needs to thoroughly examine federal housing policy and identify the problems with our current system. Accordingly, I believe this hearing is premature.""
Two days later, Sens. John McCain (R-Arizona) and Orrin Hatch (R-Utah) ""introduced legislation"":http://www.dsnews.com/articles/senators-introduce-bill-to-end-taxpayer-support-of-gses-2011-04-04 to permanently end government support for Fannie Mae and Freddie Mac within two years.
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