Henry Cisneros, secretary of the Department of Housing and Urban Development, sent a letter to the Senate Appropriations Committee last week opposing three riders to the HUD appropriations bill. The committee approved the bill, with riders, despite his protests. No similar bill has yet been introduced in the House. Excerpts from the letter follow.
The purpose of this letter is to express my strong opposition to three riders in the HUD, Veterans Administration, and Independent Agencies Fiscal Year 1996 Appropriations Subcommittee Bill that rescind or transfer authority currently vested in the Secretary of the Department of Housing and Urban Development.
These riders would unnecessarily harm individuals who are victims of discrimination, and hamper the federal government's ability to ensure fairness in the housing markets and appropriately guarantee the safety and soundness of Fannie Mae and Freddie Mac. Moreover, the riders are extraneous to the general purpose of appropriations legislation, as none of them would result in budgetary savings. I, therefore, oppose these riders, and respectfully request that they be stricken from the bill before it advances to consideration by the full Senate.
If enacted, these three riders would accomplish the following: (1) the removal from HUD of all responsibility for enforcing the Fair Housing Act (Title VIII of the Civil Rights Act of 1964, as amended) and the transfer of this authority to the Department of Justice; (2) an immediate cessation of all activity related to the enforcement of the Fair Housing Act's prohibition on property insurance redlining; and (3) the transfer of Federal Housing Enterprise Oversight, an independent office within HUD that oversees the financial safety and soundness of Fannie Mae and Freddie Mac, to the Secretary of the Treasury....
The provision that would transfer the powers and authorities of the Director of the Office of Federal Housing Enterprise Oversight to the Secretary of the Treasury threatens the effectiveness of the safety and soundness regulation of Fannie Mae and Freddie Mac.
Financial regulation of these government-sponsored housing enterprises is currently the responsibility of the Office of Federal Housing and Enterprise Oversight. OFHEO resides within the Department of Housing and Urban Development, but its legislative authority gives it a high degree of regulatory independence, comparable to the independence of the OCC and OTS within the Treasury Department.
The VA/HUD Appropriations subcommittee bill, however, would revoke this independence by transferring its responsibilities, but not its structure or organization, to the Treasury Department. This provision purports to reduce government waste and inefficiency by eliminating an unnecessary agency.
However, no reduction in government spending or deficits would be achieved; OFHEO's operations are totally funded by assessments on Fannie Mae and Freddie Mac. Instead, by removing the independence and regulatory decision-making, this provision could increase the risk associated with the government's perceived implicit guarantee of $1.3 trillion of the GSE's securities.
OFHEO, in its present form, is small, cost effective, task specific, and talented. No one, to my knowledge, has suggested otherwise.
In creating OFHEO in 1992 to protect taxpayers in light of substantial potential costs associated with the GSEs, Congress, with the strong recommendation of the Treasury Department, gave OFHEO a high degree of independence. The aim was to protect OFHEO from unwarranted political influence in its supervision of these large and important institutions, as the OCC and the OTS are protected in their supervision of banks and thrifts.
In my view, it is highly desirable that OFHEO remain with HUD. There are many synergies between OFHEO's financial regulation and HUD's programmatic regulation that have benefited both. At the same time, OFHEO's independence in its regulation, examination, and enforcement authorities has been carefully maintained.