During a hearing today on the status of our nation’s housing finance system after nine years of conservatorship, Senator Bob Corker pressed Federal Housing Finance Agency (FHFA) Director Mel Watt to explain how a draw on government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac’s line of credit at the Department of Treasury could disrupt the mortgage market, calling it a “baseless” argument. Corker also warned Watt against any unilateral action that would hinder or slow congressional efforts to reform the entities.
“[Fannie Mae and Freddie Mac] have $258 billion worth of capital available to them,” said Senator Corker.
“This whole notion of them running out of resources is just a baseless issue, and I don’t know why that, even at this time, is being discussed because what it does, [Mr. Watt], is it changes the dynamic of what’s been happening. It makes it appear as if there’s a different approach that’s being taken by the [Trump] administration. The administration is working with us. We’re working with others to move ahead with reform, but all of a sudden, a unilateral step by you when they’ve got $258 billion in capital available… If you draw upon it – that’s what it’s for, by the way – it in no way effects the credit or anybody’s perception of the securities that are being put out.”
In response to a claim by Mr. Watt that a draw from the $258 billion credit line could interrupt the market, Corker said that the risk is “nonexistent” and that a draw would have no effect on the market.
“It’s one of the most baseless arguments I’ve ever heard,” said Senator Corker.
Senator Corker also pressed Mr. Watt to acknowledge that it is the role of Congress, not FHFA, to determine the future of the GSEs.
“It’s your belief, as we’ve discussed in multiple conversations, that the future of housing finance reform is totally Congress’ job to do, and you’re relying upon us to make that happen,” said Senator Corker. “It’s my sense that the [Senate Banking Committee] Chairman [Mike Crapo] and Ranking Member [Sherrod Brown] wish to take that up in the near future. And from your perspective that’s our job to do, and that’s how we determine the future of these entities?”
“I absolutely agree,” said Mr. Watt.