In an effort to spur substantive and structural housing finance reform, U.S. Senators Bob Corker (R-Tenn.) and Mark Warner (D-Va.), members of the Senate Banking Committee, Wednesday offered a component of the Jumpstart GSE Reform Act as an amendment to S.Con.Res.11, the fiscal year 2016 budget resolution. The amendment would prohibit the sale of Treasury-owned senior preferred shares in government-sponsored enterprises Fannie Mae and Freddie Mac without congressional approval.
“Much effort has been put forth to develop a bipartisan, bicameral consensus that congressional action is needed to wind down Fannie Mae and Freddie Mac and reform our housing finance system,” said Senator Corker. “The fate of these failed enterprises should be determined by Congress, and I hope this amendment will signal that strong sentiment in the Senate.”
“Given Fannie and Freddie’s significance to our housing market, any decision about their future should be based on bipartisan policy goals that have been reviewed and approved by Congress,” said Senator Warner. “It’s been seven years of limbo and volatility since the GSEs were taken into conservatorship. It’s time for Congress to act on a long-term solution for our housing finance system.”
In addition to Senators Corker and Warner, the amendment is cosponsored by Senators David Vitter (R-La.), Elizabeth Warren (D-Mass.), Heidi Heitkamp (D-N.D.), and Jon Tester (D-Mont.).
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. There is broad agreement that the status of the GSEs prior to conservatorship was a failure and the best way to prevent a repeat and protect taxpayers is through comprehensive housing finance reform. 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, said officials.
Text of the amendment is available here.