At last month’s annual mortgage-industry trade show,
most political and industry analysts agreed that there aren’t great odds that
Congress will pass a bill addressing the future of Fannie Mae and Freddie Mac
before 2014, let alone 2016.
Weitz - Congress CAN'T end Fannie or Freddie because they provide lending or guarantees for a majority of loans these days. Abolishing Fannie and Freddie would destroy the housing market and Congress knows it.
Several developments unfolding right now could make the
next five or six months among the more consequential periods for housing-finance
policy since the companies were taken over by the government five years ago.
Here are three reasons why:
First, Fannie and Freddie are now reporting large profits. This could make it easier for
the company’s defenders—who were silent when the firms were hemorrhaging cash
during the bust—to more forcefully lobby in favor of less dramatic changes. By
next February, when both companies report their fourth quarter earnings, both
firms should be able to say that they’ve sent more in dividends to the U.S. Treasury than the
amounts they were forced to borrow over the previous five years.
Rising profits could also trigger an important but obscure
change in federal budgeting, where congressional accountants “score” the firms
as revenue-generating entities. If that happens, Congress would either have to
raise revenue or cut spending elsewhere as part of any overhaul.
Second, the Obama administration
is moving ahead with plans to install a permanent director to the independent
agency that oversees Fannie and Freddie, the Federal Housing Finance Agency.
The director of the FHFA is an incredibly powerful job because it can stand in
the shoes of the shareholders and board of directors of both companies,
plotting long-term strategy and making day-to-day management decisions.
Third, the Senate Banking Committee is working in a
bipartisan fashion towards constructing a comprehensive housing-finance overhaul
bill that will address the future of Fannie and Freddie.
Bipartisan agreement is far from assured. It involves
threading a needle between three general groups: the centrist supporters of the
Corker-Warner bill, liberal Democrats who want to see a larger government role
(particularly in affordable housing), and conservative Republicans who are wary
of continued, heavy federal involvement in the mortgage market.
Whatever the committee produces will essentially mark the
starting point for what, if anything, Congress is able to pass in 2015 or 2017.
In other words, even if this is only the first inning, a number of key
decisions could get made here that define the boundaries for the rest of the
game.
House Republicans have advanced their own bill with no
Democratic support, which should serve as one end point for any overhaul. How
far the more-conservative House Republicans are willing to bend to support a
greater federal role in housing could determine how soon a bill arrives on the
president’s desk.
Lawmakers further out on the left, meanwhile, are likely to
insist that this new system provides sufficient credit access to low- and
moderate-income households. They’re wary of any market in which government
guarantees mostly serve the borrowers that arguably need them the least. Among
the key questions to unfold: what does the White House do if liberals decide
that the centrist Senate bill doesn’t go far enough?
The upshot is that the next few months could show whether
there’s any reasonable chance of getting legislation passed while Mr. Obama is
in office, or whether these decisions will get kicked down the road beyond
2017. For
