Fannie Mae and Freddie Mac have a target on their back. Both sides of the aisle in Congress are looking to abolish the two mortgage giants. Competing bills in the House and a bipartisan bill in the Senate. Translation, neither company is going anywhere. The likelihood of the House and Senate getting together on something as complex as housing finance is near zero. Midterms are approaching and Congress will be hitting the campaign trail in a matter of months.
The bill from Democrats in the House was put forward by the top-ranking Democrat on the U.S. House Financial Services Committee. By the time they get the name of the committee out, Congress will be in recess. Rep. Maxine Waters put forward a bill that would see both Fannie and Freddie abolished, and replaced with a new lender-cooperative.
It would include a government guarantee for home loans and create a cooperative in which mortgage-backed securities could receive federal insurance. Yes, because 2008 worked out so well, lets just federalize the banks screw-ups. At least the Federal Reserve would have one-stop shopping if it needed to restart QE.
“Fannie Mae and Freddie Mac’s return to profitability and repayment of taxpayer dollars has led some to rightly speculate whether (they) need any reform at all,” Waters said in a statement. “I am hopeful that this legislation will continue to move the conversation on housing finance reform forward.
Small banks would also get direct access for financing loans. Democrats want to ensure they are not shut out of the process by the larger players. It would also help provide sources for more affordable housing.
The counter to this bill from the Republicans is decidedly more conservative. They want to see Fannie Mae and Freddie Mac gone, but with free market principles ruling the day.
Like all things Washington, the bills are going nowhere in the near term. Both Houses are looking for the exits to gear up for the midterm elections.