Today, Congress approved a $1.1 trillion budget deal that prevents a governmental shutdown and funds federal agencies through next fall. Included in the bill is the Jumpstart GSE Reform Act, co-authored by controversial senator Bob Corker (R-Tenn.).
Key provisions of Jumpstart include granting Congress – not the executive branch – the authority over housing finance reform. Another prevents the Treasury from selling its preferred shares in Fannie Mae and Freddie Mac until at least January 1, 2018.
David Stevens, President of the Mortgage Bankers Association, says relegating housing finance reform to Congress “reinforces the desire by many policymakers, supported by most housing stakeholders, to enact structural GSE reform before Fannie Mae and Freddie Mac can be released from conservatorship.” But as we’ve seen, Congress has shown no real willingness or ability to move reform forward. That means for the foreseeable future, the GSEs will be locked into conservatorship.
At least some progress had been made when the Treasury and the Federal Housing Finance Agency, the GSEs regulator, had more control. Jumpstart hamstrings those efforts by requiring Congressional approval.
And if that’s going to be the case, opponents of Jumpstart believe Congress should at least leave the door open for the Treasury to sell its shares of the two corporations. “This would be especially important given the small and – by design – shrinking capital reserves held by Fannie Mae and Freddie Mac, which increases the likelihood of future bailouts,” writes The Leadership Conference on Civil and Human Rights in a letter to Speaker Paul Ryan and others.
Bailouts? Corker isn’t worried that this legislation increases that risk. “Either way, American taxpayers are fully at risk now,” Corker said earlier this week.
Well, that’s reassuring. Apparently $188 billion in taxpayer funds wasn’t enough.
The House overwhelming approved the spending package in a 316-133 vote. The Senate later approved the bill 65-33. It has now been sent to President Obama, who is expected to sign it in to law.
Advocates have called the decision to include Jumpstart in the omnibus “regrettable,” but have asserted that the fight will go on—particularly as it relates to ending the Treasury’s sweep of profits.
“What has not changed is this: The net worth sweep is illegal. Shareholders and others will continue to press ahead as their litigation gains momentum,” says Investors Unite, a national coalition aimed at regaining their members’ investments in the GSEs that are currently being confiscated by the Treasury.
As it turns out, it might not be the executive branch or legislative branch that ushers in housing finance reform. It might just well be the judicial branch.