Liberal Forum

Misty » 19 Feb 2014 2:50 pm » wrote:And if he really wanted to reform Fannie and Freddie, there was nothing to stop him.
His party had control of Congress.

Reform bills introduced, but nothing has passed.
Updated: Wednesday, June 27th, 2012

When the nation's housing crisis grew into an economic disaster, many Republicans in Washington pointed to two culprits: Fannie Mae and Freddie Mac.
The housing giants -- Freddie Mac is officially called the Federal Home Loan Mortgage Corporation and Fannie Mae is the Federal National Mortgage Association -- are government sponsored enterprises, funded by taxpayers but run as private companies. The federal government created them to buy up mortgages, bundle them and sell them as mortgage-backed securities on the open market, thus increasing the money available for home loans.

As we noted in our first update, Fannie and Freddie were powerful organizations and the nation's largest mortgage buyers during the housing boom. They backed shoddy loans, leaving taxpayers on the hook when the market crashed.

The portfolio of the two firms is worth roughly $1.5 trillion, the New York Times reported in early 2012. When Republicans campaigned to take over the House in 2010, they pledged to reduce that by many zeros, as well as establish new capital standards and shrink the government's role in the mortgage industry.
But nearly two years into the 112th Congress, none of that has been done. Bills have been introduced, but none has made it to a floor vote.

"That no bill has come to the House floor, no real reform bill, is a disappointment and shows how they've backtracked from much of the pledge,” said John Berlau, senior fellow at the Competitive Enterprise Institute, a think tank that advocates for minimal government involvement in markets.
In addition to the bills mentioned in our first update, several more were introduced that would begin to downsize Fannie and Freddie.
H.R. 1227, the GSE Risk and Activities Limitation Act prohibits the GSEs from offering, undertaking, transacting, conducting or engaging in any new business activities while in conservatorship or receivership. The restriction is sought to reduce Fannie Mae's and Freddie Mac's market dominance and limit their size.
H.R. 1225, the GSE Debt Issuance Approval Act requires the Treasury Department to approve any new debt issuance by the GSEs and justify its decision to Congress and the FHFA within seven days.
H.R. 1223, the GSE Credit Risk Equitable Treatment Actclarifies the risk retention rules required under the Dodd-Frank Act to make clear that Fannie Mae and Freddie Mac will be held to the same standards as any other secondary mortgage market participants.
H.R. 1221, the Equity In Government Compensation Act suspends the compensation packages for executives of Fannie Mae and Freddie Mac and places all employees on the Federal pay scale.

All of those bills were introduced in early 2011, passed by a subcommittee and referred for a committee vote. None has seen any action since April 2011.

Several more bills, aimed at ensuring repayment to taxpayers, requiring greater transparency and setting new caps on bailouts, are languishing too.
H.R. 1182, the GSE Bailout Elimination and Taxpayer Protection Act, is perhaps the most comprehensive approach to winding down the operations of Fannie Mae and Freddie Mac. It sets a deadline for ending the conservatorship and puts strict new rules in place over future operations of the two GSEs. Despite drawing 79 co-sponsors, it also hasn't been touched since April 2011.

We talked to two experts who say the inaction is not just a matter of Democrats stymying the bills.
"There are some Republicans that are very much attuned to the housing lobby, and the housing lobby of course likes government guarantees and they pretty much like Fannie and Freddie as they are,” said Ed Pinto, a fellow at the conservative American Enterprise Institute and former vice president of Fannie Mae. "There's not unanimity.”

Said Berlau: "There are many reformers within the Republican party who are serious about phasing Fannie and Freddie out,” singling out Rep. Scott Garrett of New Jersey, who backed many of the reform bills. "There are also too many defenders of the status quo within the party.”
Pinto attributes it to what he calls the "government mortgage complex.”

"You've got the housing lobby who likes to have lending to as many people as possible … (and) historically has been very supportive of anything to expand the footprint of lending, and the path of least resistance to that,” he said.

"Second you have Wall Street which loves to trade things,” he said, noting that 200 billion Fannie Mae securities trade every day and "Wall Street makes money on each buy and sell."

The third piece are community groups that push for affordable housing and looser lending to enable more people to buy homes.
"Their efforts dovetail with the housing lobby,” Pinto said. "It's hard to oppose that.”

http://www.politifact.com/truth-o-meter ... freddie-m/