WASHINGTON -
The effort to set up a new regulatory scheme for Fannie Mae and Freddie Mac has been broadened in each of the three Congresses in which it has been debated, spreading to cover, in essence a new oversight for the vast secondary mortgage market.
The bill passed by the committee last week would create a new regulator for the two secondary market giants, but also the 12 Federal Home Loan Banks, which have been struggling over the past five years to create their own secondary market alternative to Fannie and Freddie.
Most of the debate last week centered on a provision requiring Fannie and Freddie to set aside a portion of their business to finance affordable housing programs, just as the FHLBs are required to do. The affordable housing fund that would be created from Fannie and Freddie, projected to be as much as $500 million, or five times the FHLB funds.
Republican members of the Financial Services Committee opposed the fund and called it a new tax on a private company. But Barney Frank, the Democratic Chairman of the panel who developed the proposal, said both Fannie and Freddie are government sponsored enterprises that enjoy multiple benefits from their government charters.
Republican senators who have expressed the same concerns as their GOP brethren in the House, are expected to oppose the provision when it gets to the Senate.
But the House committee appeared to have swept away the major impediment to last year's bill by allowing the new regulator to order a divestiture of mortgage holdings, but only on the basis of safety and soundness concerns.
Senate Republicans, who controlled the Senate in the last Congress, refused to put the bill to a vote because they opposed a Bush administration proposal, backed by then-Federal Reserve Chairman Alan Greenspan, for both companies to divest of hundreds of millions in mortgage holdings. Their position is that Fannie and Freddie were chartered by the government to facilitate a secondary market and that the holdings of billions in mortgage securities were solely for profit goals, and not to further the original mission of the GSEs.
The new bill represents a compromise on both positions.
The bill is now headed to a vote by the full House, which passed it easily in the last congress.
