GOP Chips Away At Fannie, Freddie

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WASHINGTON – In a move widely seen as political gamesmanship, the Republican-controlled House Financial Services Subcommittee on Government Sponsored Enterprises have continued to pass bills aimed at phasing out Fannie Mae and Freddie Mac, even though the bills seem destined to fail once they get to the Senate.

The panel, which endorsed five such bills earlier this year, added seven more last week and is planning on as many as 12 more before the end of the year. The bills are aimed at eliminating government backing for the two secondary mortgage market giants – which have been under conservatorship since September 2008 – and privatizing their functions.

The credit union lobby is opposed to the move because it sees the government backing of the secondary market, both in buying their mortgages and guaranteeing securitized loans, as critical to evening the competition with giants that dominate the vast majority of the mortgage market.

The move by the GOP lawmakers is seen as gamesmanship because everyone in Congress knows that any plan to resolve the Fannie and Freddie debacle – the failure of the two GSEs has cost taxpayers an estimated $150 billion to date with no end in sight – will require a comprehensive and not a piecemeal approach. The Senate, which is controlled by the Democrats, has indicated it won’t undertake such an effort until at least next year.

Last week’s bills would: cap government assistance in the Fannie and Freddie bailout; limit the amount of legal fees the government will pay to defend Fannie and Freddie figures in civil litigation; eliminate funds the two companies set aside for low-income housing assistance; limit the size of the companies’ business; and, revoke their government sponsored charters.


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