Andrew Harrer/Bloomberg -
The Senate banking committee passed the bill 13 to 9,
with seven Republicans and six Democrats voting in favor of it.
A measure that
would
dismantle Fannie Mae and Freddie Mac won the
approval of a Senate commitee Thursday but most
likely won’t make it to the full chamber this
year because it failed to attract a large enough
majority of the committee’s lawmakers.
The Senate banking committee passed
the bill 13 to 9, with seven Republicans and
six Democrats in favor of it. But despite weeks
of negotiations, the bill’s proponents could not
win over a key bloc of liberal Democrats.
Without their support, Senate Majority Leader
Harry M. Reid (D-Nev.) is unlikely to bring the
bill to the Senate floor.
The Obama administration, which backed the measure and worked
to rally votes for it, signaled that it won’t stop trying. In a
statement Thursday, the White House said it would keep pushing
to “broaden support for reform” in what it views as the last
piece of unfinished business left to tackle in response to the
2008 financial crisis.
But many housing experts who follow the issue say the chances
of getting the job done this year are slim, and they could erode
further next year after the November mid-term elections if
Democrats lose control of the Senate.
“We doubt that there is either the legislative capacity or
the political willingness to address (Fannie and Freddie) reform
further in this Congress,” Isaac Boltansky, an analyst with
Compass Point, wrote in a note to clients. A revamp of housing
finance probably won’t take place until 2017, Boltansky
predicted.
Fannie and Freddie, which back about 60 percent of U.S.
mortgages, do not make loans. They buy mortgages from lenders,
package them as securities and sell them to investors. They also
insure the mortgages and pay investors if the loans go bad.
The government took control of the companies in 2008 to keep
them solvent and ward off a collapse of global financial
markets. Nearly six years later, there’s broad concensus in
Congress that the firms should be shut down. But lawmakers can’t
agree on how to do it.
The measure — sponsored by Sens. Tim Johnson (D-S.D.)
and Mike Crapo (R-Idaho) — aims to gradually shift the risks of
mortgage lending away from taxpayers and have the private sector
absorb the first 10 percent of any losses on mortgage-backed
securities. The government would cover additional losses.
On Thursday, Democrats who voted against the bill said they
were worried it would limit access to affordable housing in
underserved areas and enable a few Wall Street players to
dominate the mortgage market. Republican opponents said the
measure was too complex and still kept taxpayers on the hook.
With congressional action unlikely, attention has turned to
the new head of the Federal Housing Finance Agency, which
oversees Fannie and Freddie. FHFA Director Melvin Watt said this
week that he doesn’t
plan to reduce the Fannie and Freddie footprint in the
housing market until Congress comes up with an alternative
system.
Also at center stage now are the various
lawsuits filed by investor groups that are trying to stop
the government from taking all the profits Fannie and Freddie
generate, an arrangement put in place in 2012 as a term of the
broader taxpayer bailout.
The committee on Thursday changed the bill to reflect that it
would not “alter, supersede or interfere” with any court
decision related to those lawsuits.
In a new Congress, the bill that passed Thursday, or some
version of it, would need to pass through the Senate banking
committee again before reaching the Senate floor. That committee
will have a new leader, and the momentum built this year could
be lost.
Johnson, the committee’s chairman and lead sponsor of the
legislation, is retiring. If Democrats retain control of the
Senate next year, the two Democrats in line to replace him did
not vote for the bill passed Thurday, Boltansky noted.
Of the two Republicans who could take his post, only one
supported the bill — Crapo, the panel’s most senior Republican
and a co-sponsor of the bill.
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