Senate Democrats Defeat Amendment to Unwind Fannie, Freddie

Lawmakers have cast their ballots in favor of keeping mortgage giants ""Fannie Mae"":http://www.fanniemae.com and ""Freddie Mae"":http://www.freddiemac.com intact. In a 56 to 43 vote Tuesday essentially split down party lines, Democratic senators defeated an amendment to the[IMAGE]

financial regulatory reform package that would have set a finite end date for taxpayers' support of the GSEs and laid out a 15-year plan for the companies' ultimate wind-down and dissolution.

Republican Sens. John McCain (Arizona), Judd Gregg (New Hampshire), and Richard Shelby (Alabama) sponsored the amendment, as reported on by ""DSNews.com last week."":http://dsnews.comarticles/mccain-amendment-would-take-gses-off-taxpayer-support-2010-05-06 Together, the two mortgage financiers have drawn $110 billion in taxpayer dollars since they were put into conservatorship in September 2008. Last week, they asked the Treasury for $20 billion more.

On the Senate floor Tuesday, Shelby said ""Freddie Mac and Fannie Mae were at the heart of the financial crisis. How we can have basic regulatory reform, financial reform, if we're not going to include Fannie Mae and Freddie Mac?""

There have been some critics who have called the GSEs' bailout ""the biggest financial scandal in the United

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States."" But at the same time, many find it hard to deny that it's Fannie and Freddie's support that is keeping the wheels of the nation's battered housing market turning.

Sen. Christopher Dodd (D-Connecticut) called the GOP amendment “reckless.” In debate Tuesday he said, ""That's hardly reform. Don't tear down what you have before you know what you're going to replace it with.""

Dodd put forth his own amendment that calls for the Treasury to submit its recommendations to Congress on the best approach to ending the GSEs’ conservatorship. It passed by a 63 to 36 vote.

In another 63 to 36 vote, senators approved an ""amendment from Sen. Jeff Merkley"":http://merkley.senate.gov/newsroom/press/release/?id=1FC10C29-1DFE-46AD-8760-F3FEEB01240E (D-Oregon) that will require lenders to verify a borrower’s ability to repay their loan from income and assets other than the home’s value. It also bans mortgage lenders and loan originators from accepting payments based on the interest rate or other terms of the loan.

In a voice vote, the Senate also agreed to an amendment put forth by Sen. Olympia Snowe (R-Maine) that exempts small businesses from the regulatory powers of a new Consumer Financial Protection Bureau.

An ""amendment from Sen. Kay Bailey Hutchinson"":http://hutchison.senate.gov/pr051210.html (R-Texas) passed with a bipartisan 90 to 9 vote, allowing the Federal Reserve to retain its bank oversight authority. The amendment says state-chartered banks and bank holding companies with less than $50 billion in assets may choose Federal Reserve supervision.

The Senate rejected an ""amendment by Sen. Bob Corker"":http://dsnews.comarticles/republicans-push-for-consumer-protection-changes-in-reform-bill-2010-05-07 (R-Tennessee) that would have removed a statute from the reform legislation that requires lenders to retain a 5 percent risk ratio on mortgages pooled and sold as secondary market securities.