Fannie Mae – Senate Watch: Who Will Be the Power Players in the Next Congress? by Investors Unite
In D.C., buzz continues around the new, Republican-controlled Senate. We’ll leave the prognosticating as to what this will mean for the country to the pundits. But we thought that Investors Unite members would appreciate some insight on the Senators who could be influential in the continuing debate over reforming Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) and what to do with the conservatorship. To that end, we’ll be presenting an occasional series called Senate Watch to introduce you to the U.S. Senators and others who can be expected to play a role in in the next Congress.
U.S. Senator Richard Shelby (R-AL)
Sen. Richard Shelby, a Republican from Alabama, is widely expected to take the gavel as Chairman of the Senate Committee on Banking, Housing and Urban Affairs. If you’ve followed banking issues for a while, Sen. Shelby might be a familiar name – he previously chaired this committee before Democrats took control of the Senate in 2008. Now that the Republicans are back in charge, Sen. Shelby will resume his chairmanship but because of the Republican Conference rules, he has only two years left to run the committee. Conventional wisdom says that Sen. Shelby will want to find areas in which he can strike deals with the Democrats on the committee to push through legislation. However, because Sen. Shelby is up for re-election in 2016, his agenda may be more risk-averse than years before.
Sen. Shelby voted against the Johnson-Crapo legislation when it came before the Senate Banking Committee earlier this year. A Businessweek article reported this after the vote:
“On the right, Senator Richard Shelby, an Alabama Republican, calls the bill ‘a complicated government-run framework that I believe overexposes the American taxpayer and creates more problems than it solves.’”
So it looks like we can count on his opposition to a Johnson-Crapo- like bill, which is good news because it did nothing to protect and preserve shareholder rights. A Housing Wire article from last week provides some great insightful into how a Chairman Shelby might handle the conservatorship:
“Shelby’s rise may, however, be a boon for shareholders of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). He’s a big advocate of privatization, and even if a PATH Act of sorts is blocked in the full Senate (or if it passes and gets a White House veto), shareholders have a friend in Shelby.
“If some sort of middle-ground, far short of full reform measure does arise in this new Republican Congress, it will favor shareholders.”
A December 2011 Think Advisor piece also addressed Sen. Shelby’s views on the conservatorship:
“As part of an ongoing series of hearings on how to reform housing finance, the Senate Banking Committee heard testimony on Tuesday from the Federal Housing Finance Agency’s first inspector general, Steve Linick.
“Sen. Richard Shelby, R-Ala., ranking member on the committee, said in his opening remarks that ‘first and foremost,’ Linick ‘must provide oversight of FHFA’s conservatorship of Fannie and Freddie to ensure that taxpayer dollars are spent wisely.’
“Shelby went on to say that the IG’s [Inspector Gerneral’s] work ‘shines a light on the larger issue of the costs arising from the administration’s failure to propose a detailed plan to end the conservatorship of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC),’ adding that it has been three years and 98 days since the conservatorship began. The conservatorship, Shelby said, ‘was never intended to last this long. Nor was FHFA designed to handle the ‘conservatorship to nowhere’ that we face today.’”
Shelby was tired of the conservatorship three years ago!
This gives reason to be cautiously optimistic about how Sen. Shelby might approach shareholder rights in Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reform. He is well known for trying to rein in Fannie Mae and Freddie Mac and perhaps he’ll be looking to burnish a legacy during his last two years as chairman of the Senate Banking Committee.
Meanwhile, on Wednesday, November 19 as Director Mel Watt of the Federal Housing Finance Agency will be testifying in front of the Senate Banking Committee. We’ll be watching closely – stay tuned on our Twitter and Discussion Board for updates!