Measures Targeting Fannie Mae, Freddie Mac Win Subcommittee Approval

A House Financial Services subcommittee wrapped up consideration Wednesday of bills aimed at dismantling operations at Fannie Mae and Freddie Mac, approving five measures.

Democrats and Republicans differ over the role Fannie and Freddie should play in the mortgage market. Republicans want to privatize the market, while Democrats contend that some federal involvement is necessary. The two firms, known as government-sponsored enterprises (GSEs), were originally chartered by the federal government and sold to private investors, then taken over by the George W. Bush administration amid the economic turmoil of 2008.

Last month, Republicans introduced a series of bills intended to overhaul operations at the GSEs and attract private capital back into the housing sector.

One bill (HR 1224) approved Wednesday by the Capital Markets and Government Sponsored Enterprises Subcommittee is central to that goal; it would cap the GSEs’ maximum portfolio size at $700 billion and reduce that cap to $250 billion over five years.

That legislation, approved by a 20-14 vote, mirrors provisions in a comprehensive GSE overhaul bill (HR 1182). Both are sponsored by Jeb Hensarling, R-Texas.

Barney Frank of Massachusetts, the top Democrat on the full Financial Services Committee, was unsuccessful in his attempts to allow Fannie and Freddie to retain mortgage assets held to meet risk retention requirements in the 2010 financial overhaul law (PL 111-203). His amendment was voted down, 14-20.

The subcommittee also rejected, 14-20, a second Frank amendment that would have excluded loans for financing multi-family residential units from the bill’s definition of mortgage assets.

Five panel Democrats supported legislation (HR 1222) by Randy Neugebauer, R-Texas. Approved 25-9, it would gradually raise the GSEs’ guarantee fees in an effort to lure private capital back into the market, an idea the Obama administration has endorsed.

By a vote of 27-6, the subcommittee approved a bill (HR 1221) by full-committee Chairman Spencer Bachus, R-Ala., that would suspend current compensation packages for Fannie and Freddie senior executives and require compensation similar to the pay of other senior federal employees.

On a 34-0 vote, the panel approved HR 1223, which would require the Securities and Exchange Commission, the Department of Housing and Urban Development and the Federal Housing Finance Agency to issue joint regulations on credit risk retention. Subcommittee Chairman Scott Garrett, a New Jersey Republican, sponsored the bill.

The panel also gave voice vote approval to a bill (HR 31) by Judy Biggert, R-Ill., that would place new reporting requirements on the Federal Housing Finance Agency.
Earlier Action

On April 5, the panel approved three related measures. One bill (HR 1226), approved by voice vote, would repeal Fannie and Freddie’s affordable housing goals. A second (HR 1225), approved 18-0, would require advance approval from the Treasury Department for the two companies to issue new debt. The third (HR 1227), also approved by voice vote, would prohibit Fannie and Freddie from engaging in any new activities or businesses during conservatorship or receivership.

Bachus announced April 5 that the subcommittee may consider as many as 16 additional measures to address the GSEs before his full committee takes up the separate pieces that the smaller panel approved this week. He also plans for his full committee to mark up the comprehensive overhaul before tackling the smaller measures.