Fannie and Freddie Targeted By New Bill

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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.

 

Ashley Downs, while a relative newcomer to the blogging scene, has quickly established herself as one of our premier bloggers. While she enjoys writing about the financial markets, she also dives into entertainment news from time to time.

1 Comment

  • Reply March 27, 2014

    Free Fannie and Freddie

    The government wants to be paid three times for a crisis they created:

    1) Net profit sweep. Oh, excuse me. ‘Dividend’ LOL

    2) Senior preferred stock

    3) Warrants to purchase 79.9% of both companies’ common shares for under a penny

    Congress caused the financial crisis by pumping the sub prime.

    Banks dumped these ridiculous loans onto Fannie’s and Freddie’s balance sheet.

    Congress wants to get rid of Fannie and Freddie now and replace them with another entity which does the same thing because “the current system is not sustainable”

    If anything needs to be eliminated it’s Congress, not Fannie or Freddie. Keep what works and throw out what doesn’t.

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