Here’s what a GOP Senate means for Fannie and Freddie

I came across this blog that was offering a prediction back in November. I thought I would post it here, about 90 days later…. There were four comments on the article which are posted here, too.

Here’s what a GOP Senate means for Fannie and Freddie: And why we’ll all be watching

November 5, 2014

Trey Garrison

With Tuesday’s WWE beat down and Republicans now in in control of the Senate, the question becomes what will happen with housing and the reform of the government-sponsored enterprises.

Unfortunately, not a lot.

The White House is congenitally incapable of giving ground. Housing reform is an incredibly important issue, but “housing reform is a hot button issue” is something often said by absolutely no one.

Further, GSE reform doesn’t divide along neat party lines in the way that health care, taxes or gun control does.

Johnson-Crapo and the PATH Act are two very different animals. The House PATH Act is a very smart but very fiscally conservative agenda that is not going to get past the White House even if it got through the Senate.

Johnson-Crapo is dead in the water – conservatives think it’s too much with the creation of yet another government agency in the form of the proposed Federal Mortgage Insurance Corp., while liberals in the Senate think Johnson-Crapo is too little in terms of affordable housing.

Further, one of the Johnson-Crapo authors, Sen. Mike Crapo, R-Idaho, won’t be rising from his place as second in charge of the Senate Banking, Housing and Urban Affairs Committee, because of Senate GOP rules.

Instead, Sen. Richard Shelby, R-Alabama, is likely going to take over Senate Banking, and he’s no moderate in senate terms.

Shelby’s rise may, however, be a boon for shareholders of Fannie Mae and Freddie Mac. He’s a big advocate of privatization, and even if a PATH Act of sorts is blocked in the full Senate (or if it passes and gets a White House veto), shareholders have a friend in Shelby.

If some sort of middle-ground, far short of full reform measure does arise in this new Republican Congress, it will favor shareholders.

Some say that congress may also look to scale down the Federal Housing Finance Agency’s role in mortgage insurance, but it’s hard to see this early what that might look like.

Also considering that the whole application of – come one, let’s be honest – the shady legal theory of “disparate impact” in housing is getting the cross check in the Supreme Court – the most progressive of housing initiative and the affordable housing mandate may be taking a backseat going forward.

Pushing the PATH Act through the House will be a breeze, should Republicans choose to go that route. Getting it through the Senate won’t be impossible, but it will be an uphill battle. Getting it past the Oval Office? No chance. And the chance of getting the votes necessary to override the veto? May as well pan for gold in your bathtub.

It’s going to be at least 2017 before we get comprehensive GSE reform. This needs a president and Congress on the same page. Divided government is usually the best, in my humble opinion, because it limits the damage either side can do.

Gridlock is a feature, not a bug.

Conservatorship and everything bad that happened in housing policy only made it through because the extraordinary circumstances of the post-crisis fallout and a rare moment of one party controlling everything and pushing through the mess that is Dodd-Frank. It may take another pendulum swing – and it will have to be to the right side – to get housing policy back on track.

That’s not happening before 2017, and maybe not even then.

Compass Point Research & Trading may have put it the most realistically.

“We expect the GSE reform conversation to return to Capitol Hill in the next Congress but doubt that there will be substantive progress. Our sense is that the Senate Banking Committee will focus on other legislative priorities and the House Financial Services Committee remains unlikely to compromise,” they wrote in a client note.

That said, there’s no reason smaller steps in fixing housing policy can’t be taken, because this is something both sides have a stake in, and not everything that needs to be done is about red or blue armbands. You can win a game hitting solid singles just as well as you can knocking it out of the park.

Meanwhile, to the Republicans – yes, good job, blah blah, don’t blow it. I don’t think voters embraced you so much as rejected the other side. Remember that.

And Democrats – better put some ice on that and take a lap. You’ll get a chance again in two years, if you learn the right lessons.

We’ll be watching.


sandyjean412 • 3 months ago
Have to agree with you. Ain’t nothin gonna happen with regard to housing. Republicans couldn’t care less — a lot less than the Democrats. The middle class will continue to shrink, and the new legislative majority will try to enrich their cohorts even more.

Richard Thompson • 3 months ago
Stop the sweep. Home loans on a 3% down payment is a fools game if Fannie and Freddie are prohibited from building capital

Sandra Thompson • 3 months ago
Wake up people! Get a second cup of coffee! Housing Finance Reform is taking place as you wipe the sleep from you eyes. The Obama Administration created the White Papers of Feb 2011 and they are the blueprint for housing finance reform! The FHFA’s Strategic Plan for the Conservatorship of FnF dated 2/21/2012 says within it’s contents that actions are being taken based on commitment to the mentioned White Papers. The Treasury’s own announcement of the 3rd Amendment to the PSPA’s , the Sweep Amendment” clearly says it is taking actions based on a “commitment to the White Papers”. The choice to have your voice heard, the choice for transparency in government, the choice to make changes and achieve consensus has been stripped from you, as Obama dictates new housing finance reform. We should not let dictators take over our government!

Phil Hall • 3 months ago
Housing won’t be on the congressional backburner – hell, it won’t get out of the refrigerator.


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