Conservative And Progressive Opposition To The Jumpstart Fannie Mae And Freddie Mac Reform Bill by Investors Unite
The “Jumpstart” GSE Reform bill that Sen. Bob Corker, R-TN, is pursuing so relentlessly has brought about something widely thought to have vanished: Agreement from both sides of political spectrum.
Veteran Republican economist Ike Brannon, writing recently in the Weekly Standard, lamented Corker’s pre-Thanksgiving push to attach the Jumpstart GSE Reform bill to an unrelated spending bill, saying, “That the provision won’t stay dead is a shame, because it is bad policy for numerous reasons.”
Simultaneously, the Center for Responsible Lending, the Leadership Conference on Civil and Human Rights, the NAACP and the National Fair Housing Alliance were among the consumer and civil rights groups that sent a letter to congressional leaders urging them to omit the proposal from the year-end omnibus spending bill. The National Community Reinvestment Coalition also backs recapitalizing and releasing the GSEs from conservatorship to advance the availability of affordable housing, and opposes the Jumpstart bill.
The Jumpstart bill would require congressional approval of any plan to enable Fannie Mae and Freddie Mac to recapitalize, effectively locking in the status quo of the flawed conservatorship well into 2017.
For Brannon, the problem is that this is completely counter to the law. The Housing and Economic Recovery Act of 2008 (HERA) directed the Federal Housing Finance Agency, as conservator, to restore the companies to fiscal soundness. In addition, it would effectively block the government from making right by investors who, of course, are litigating over the legality of the Third Amendment Sweep. In addition, Brannon says it is simply wrong to undertake such important and complex policy change without so much as a hearing or a debate.
Consumer and civil rights groups on the other end of the spectrum, likewise, are concerned that the bill has not been formally evaluated in the usual legislative process. They also warn the bill will delay needed consensus on GSE reform, thus undercutting their goals to expand affordable housing. Plus, they note, it would increase exposure to taxpayers for funding additional bailouts for the GSEs.
On the taxpayers’ interests, Brannon noted that if the government could proceed to settle investor lawsuits, the sale of the government’s stake in the GSEs could yield $100 billion – and that is money on top of the revenues swept from Fannie Mae and Freddie Mac since 2012.
“Given that the money that has been ‘swept’ into Treasury from Fannie Mae and Freddie Mac thus far already exceeds the government’s injection into the GSEs it would be hard for taxpayers to get too upset at such an outcome, especially if it helps get Treasury off the hook for future losses,” he commented.
Congressional leaders are hammering out the final issues on a catch-all spending bill this week. Given the wide ideological and political chasm on so many issues, it has not been easy. It would be a truly astounding disappointment if the Jumpstart bill was in the package given the strong opposition from all quarters. When leaders from both parties are hearing the same thing from their base, they should listen.
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Bob Corker’s “Jump Start GSE Reform” Will Only Prolong the Conservatorship of Fannie Mae and Freddie Mac