In an effort to spur substantive and structural housing finance reform, Senators Bob Corker and Mark Warner (D-Va.), members of the Senate Banking Committee, on Wednesday offered the Jumpstart GSE Reform Act as an amendment to H.R. 2577, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act.
The amendment would prohibit the sale of Treasury-owned senior preferred shares in government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac without congressional approval and also prohibit any increase in the guarantee fee – which is required to be charged by the GSEs – from offsetting other government spending.
“Although the FHFA is taking important steps to de-risk Fannie Mae and Freddie Mac, taxpayers will continue to be on the hook for a future bailout if Congress does not produce legislation to transform our housing finance system,” said Senator Corker. “There is overwhelming consensus that congressional action is needed, and it is hard to imagine that anyone would ever want to harm taxpayers and return to the failed model of private gains and public losses. While comprehensive reform is my preference, this amendment will ensure the future of Fannie and Freddie will be determined by Congress.”
In 2008, Fannie Mae and Freddie Mac were taken into government conservatorship and given a $188 billion capital injection from taxpayers to stay afloat. As a result of the bailout, the U.S. Department of Treasury purchased senior preferred stock in the GSEs and was given sole discretion to sell or otherwise dispose of those shares.
Officials said, "There is broad bipartisan, bicameral consensus that the status of the GSEs prior to conservatorship was a failure and that the best way to prevent another bailout and protect taxpayers is through comprehensive housing finance reform. Furthermore, the Obama administration has made clear that they continue to believe comprehensive housing finance reform is the only effective way forward and have publicly rebuked calls by some activist groups to recapitalize Fannie Mae and Freddie Mac and release them from conservatorship."
This amendment will help ensure the ultimate resolution of Fannie Mae and Freddie Mac is determined by Congress, and it does not indicate which housing finance reform proposal should be adopted. Senators Corker, Warner, David Vitter (R-La.), and Elizabeth Warren (D-Mass.), introduced S.2038, the Jumpstart GSE Reform Act, in September.