Senate Banking Committee Chairman Tim Johnson (D-SD) and Representative Mike Crapo (R-ID) will be heading to the Dirksen Senate Office Building to present S.1217, the Housing Finance Reform and Taxpayer Protection Act of 2013. This meeting is considered an Executive Session, which means it is closed-door and will bar outsiders. The bill details exactly how the government could go about eliminating both Fannie Mae and Freddie Mac. This isn’t a particularly new concept, as Mel Watt, director of the Federal Housing Finance Agency (FHFA) has been pushing for the same thing for a while now.
“One topic that is not on FHFA’s agenda, because it’s not part of our statutory mandate, is housing finance reform legislation. My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA,” said Watt, according to Market Watch. “I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary.”
The bill faces stiff opposition from six key democrats including Elizabeth Warren (D-MA), Chuck Schumer (D-NY), Sherrod Brown (D-OH), Jeff Merkley (D-OR), Robert Menendez (D-NJ) and Jack Reed (D-RI). Their support is crucial to this bill surviving, but the outlook is bleak.
Policy analyst Isaac Boltansky told Bloomberg that Johnson and Crapo’s bill is effectively dead, at least until 2015. “The Johnson-Crapo package will still likely clear the committee, but without any of the six targeted Democrats signing on it is highly doubtful that the measure will get a floor vote,” Boltansky said.
Confidence is high that the bill will pass the Committee, however; once out on its own, it’s a totally different story. “We know we have the votes to pass it out of committee,” said Senator Bob Corker (R-TN). “The question is, can we broaden support? I don’t think we can say yet how that’s going to work out.”
“It’s exceedingly unlikely that the Senate Majority Leader, Harry Reid, will allow the bill to the floor given the narrow margin by which the bill was approved in committee, especially so because the most liberal members of the key Banking Committee are in opposition,” said Rick Lazio, former U.S. Representative from New York, and current leader of law firm Jones Walker’s affordable housing and housing finance practice. While this bill won’t become law this year, members of congress have become more knowledgeable on the issue, much work has been done in terms of bill drafting and we now know the starting point for Senate consideration of GSE reform in 2015. It certainly looks like Freddie and Fannie will survive in their current form for at least another year.”
While few are certain exactly what steps the bill takes in dissolving Fannie and Freddie, both of those GSEs have returned to a state of being profitable. It’s interesting to note that Watt has seemingly softened on the notion of eradicating the two entities, albeit, for now. Maybe his negativity was a bit too knee-jerk for the President’s tastes?