In an effort to spur substantive and structural housing finance reform, Senators Bob Corker, Mark Warner, David Vitter, and Elizabeth Warren, all members of the Senate Banking, Housing and Urban Affairs Committee, on Wednesday reintroduced the “Jumpstart GSE Reform Act.”
The legislation would prohibit any increase in the guarantee fee – which is required to be charged by government-sponsored enterprises Fannie Mae and Freddie Mac – from offsetting other government spending while also prohibiting the sale of Treasury-owned senior preferred shares in the GSEs without congressional approval and structural housing finance reform.
“There is an overwhelming bipartisan, bicameral consensus that congressional action is needed to reform our housing finance system and it is hard to imagine that anyone truly wants to return the GSEs to the failed model of private gains and public losses,”said Senator Corker. “While comprehensive reform is my preference, we must not allow a small minority to prevent us from making any progress at all.
I will continue to look for ways to move us closer to a long-term solution for our housing finance system and am pleased to have Senators Warner, Vitter, and Warren join me in this effort.”
“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.”
“As my colleagues and I reintroduce this broadly bipartisan legislation, momentum is certainly building to ensure that Fannie Mae and Freddie Mac are not turned loose to wreak havoc on the economy and taxpayers in their current form,” said Senator Vitter. “I’m confident that when it reaches the floor, there will be an overwhelming show of bipartisan support for this common sense, reform legislation.”
“It has been nearly seven years since the financial crisis, and it is past time to reform Fannie and Freddie. That means removing the obstacles and starting a bipartisan effort to take on housing finance reform this Congress. I am pleased to have the opportunity to work with Senators Corker, Warner, and Vitter, and I look forward to collaborating with them and other Senators in the months ahead on this important issue,” said Senator Warren.
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 the 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. Officials said, "This legislation 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."