WASHINGTON — Lawmakers still have a long way to go before enacting reform of Fannie Mae and Freddie Mac, but the first of two Senate Banking Committee hearings examining Mike Crapo’s reform proposal could signal how legislative talks will play out in the future.
The Idaho Republican’s proposal, which was released in February, would turn Fannie and Freddie into private mortgage guarantors — competing with other private guarantors — while allowing for Ginnie Mae to provide a government backstop.
“This outline is the byproduct of over a dozen hearings conducted by this committee over the past decade,” Crapo said in his opening statement. “It also incorporates key elements of several housing finance reform plans that have been advanced by thought leaders.”
Crapo’s plan is one of many being discussed to reform the government-sponsored enterprises, including a White House framework reportedly in the works. His bill like others faces an uphill battle in a divided Congress. Still, senators took the opportunity Tuesday at a hearing to examine the plan and question experts about possible areas of agreement.
Above all, both sides of the aisle coalesced around the fact that the current decadelong conservatorships of the GSEs are unsustainable. But with the housing and financial markets both stable, enacting a housing finance bill is low on the legislative priority list.
“It’s always easier to fix the roof of a house when it’s sunny out … and yet because our housing market and our economy are healthy, there appears to be no crisis immediately in front of us,” said Sen. Mike Rounds, R-S.D.
The hearing comes as President Trump’s nominee to lead the Federal Housing Finance Agency, Mark Calabria, awaits Senate confirmation. A number of lawmakers have expressed concern that Calabria might usurp their role in the reform process, which some suspect could serve as a catalyst for long-awaited legislative action.
Here are four things we learned about the appetite for GSE reform from Tuesday’s hearing:
Crapo’s outline praised but lawmakers still can’t agree on path forward
Senators and witnesses from both sides of the aisle applauded Crapo’s efforts, saying his reform outline marked an important step forward.
“Housing, affordable housing and the lack of affordable housing in Nevada is the number one issue, and I know it’s an issue across the country, so I just appreciate the outline that you put out there and the ability to have a starting foundation to have this discussion,” Sen. Catherine Cortez Masto, D-Nev., told Crapo.
However, beyond praising Crapo’s plan, senators found few areas of bipartisan agreement.
“The outline does not address the costs that families all across this country — black, white and Latino, urban, rural, Republican, Democrat — face, and unless we set some real goals and put some real resources into doing this, we’re not going to make the change,” said Sen. Elizabeth Warren, D-Mass.
Others expressed concern that the multiple guarantor system Crapo proposed would harm the market and would return to the same system that was in place before the financial crisis.
“While competitive markets are generally a good thing, competition can have deleterious effects in some circumstances. One needs look no further than Wells Fargo’s false account scandal,” said Adam Levitin, a law professor at Georgetown University, who testified at the hearing. “The intense competitive pressures on Wells encouraged corner cutting and worse.”