Fannie Mae – Are You Smarter Than A 5th Grader? Ed DeMarco Hopes You Aren’t

Fannie Mae – Are You Smarter Than A 5th Grader? Ed DeMarco Hopes You Aren’t

Are You Smarter Than A 5th Grader? Ed DeMarco Hopes You Aren’t by Investors Unite

Are You Smarter Than A 5th Grader? Ed DeMarco Hopes You Aren’t

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Ask a fifth grader how laws are made and you’ll hear about an abbreviated committee process, Floor votes in the U.S. House and U.S. Senate, a White House signing ceremony, and the federal courts upholding laws if questions of constitutionality arise. What you will not hear is about how unelected bureaucrats interpret laws themselves and apply them in ways perhaps unintended.

Take the Housing and Economic Recovery Act of 2008, for example. Written and signed into law in the wake of the financial meltdown, the act created the Federal Housing Finance Agency and led to the creation the conservatorship into which Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) were placed. There are few who would argue that the two mortgage giants weren’t in need of significant reforms. But it was an act of Congress that created the entities – government-sponsored enterprises – and another act of Congress is required to institute changes.

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Unless you’re Ed DeMarco – then apparently you get to interpret laws anyway you want.

A few weeks ago, the Bipartisan Policy Center hosted its annual Housing Summit and featured Ed DeMarco, the man put in charge of FHFA after it was chartered. New federal agencies don’t come along every day, and being put in charge of one from the outset must seem like a pretty heady proposition, especially one that’s charged with overseeing the two entities that are responsible for underpinning the U.S. housing market. During a wide-ranging panel, Ed DeMarco said the following:

“During my tenure, I believe that FHFA had a responsibility not just to operate the conservatorships according to the law, but to be attentive to the direction the administration and lawmakers were going.”

That’s an interesting “belief.” How does it square with what is stated within HERA about FHFA’s role, though?

FHFA powers as conservator, as outlined by HERA: is to “take such action as may be—(i) necessary to put the regulated entity in a sound and solvent condition; and (ii) appropriate to carry on the business of the regulated entity and preserve and conserve the assets and property of the regulated entity.” [12 USC § 4617(b)(2)(D).]

The act is pretty clear on what it intended FHFA to do and how the agency was to act toward Fannie and Freddie, yet Ed DeMarco admits that he expanded on the agency’s responsibilities because he had certain understandings based on conversations with Members of Congress and the Administration. If there is enough support in Congress to change a law, then the law gets changed; or, the Administration may issue an executive order to enact rules or clarify regulations. What should not happen is an unelected bureaucrat deciding for himself to expand sections of laws to areas never considered, like the unconstitutional takings of private property without compensation.

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