WASHINGTON — A bipartisan group of senators reintroduced a bill Wednesday that would prohibit lawmakers from using certain housing finance fees to offset unrelated government spending.
Lenders typically pay "guarantee fees" to the government-sponsored enterprises Fannie Mae and Freddie Mac for backing loans. Under the legislation — proposed by Sen. Elizabeth Warren and three others — those fees could not be directed to pay for other expenditures in future budget deals. The bill is intended in part to remove any further roadblocks to broader efforts to reform the housing finance system.
In 2011, lawmakers paid for a short-term payroll tax cut using a guarantee-fee increase, and have again looked to the fees this summer to fund a transportation bill still pending in the Senate. But critics say that raising the fees for reasons unrelated to housing finance could make it harder to unwind or dramatically reform the GSEs in the coming years.
"It has been nearly seven years since the financial crisis, and it is past time to reform Fannie and Freddie," Warren said in a press release. "That means removing the obstacles and starting a bipartisan effort to take on housing finance reform this Congress."
The bill, which is also sponsored by Sens. Bob Corker, R-Tenn., Mark Warner, D-Va., and David Vitter, R-La., would separately bar the Treasury Department from selling its shares of the GSEs without approval from Congress.
If passed, the bill could complicate ongoing GSE shareholder lawsuits against the government because it would block any attempts by the Obama administration to settle the litigation without congressional approval.
"Passage of the 'Jumpstart GSE Reform' language would be a negative event for current GSE shareholders as it would foreclose on an administrative path for action and leave the issue squarely in the hands of Congress where it would surely languish until 2017 at the earliest," Isaac Boltansky, an analyst at Compass Point Research & Trading, said in a note earlier this week.
Some had speculated that lawmakers could add to the bill a separate measure to cap the salaries of the chief executives of the GSEs. However, a cap on GSE compensation ended up passing the Senate as standalone legislation, via unanimous consent, earlier this week. That standalone bill — also authored by Warren and Vitter — would reverse a plan by Federal Housing Finance Agency Director Mel Watt to raise the annual compensation for the Fannie and Freddie CEOs to $4 million each, up from $600,000.