Johnson-Crapo Bill passes Banking Committee, Margins Smaller than Hoped

S 1217, the Johnson-Crapo housing reformrnbill passed thernSenate Banking Committee today.  rnCommittee chairman Tim Johnson (D-SD) had hoped to send the bill to thernwhole Senate with at least 16 of the 22 committee members voting for therncommittee’s recommendation, but was able to obtain only a 13 to 9 favorablernvote.  Several Democrats includingrnElizabeth Warren (MA), Jeff Merkley (OR), Sherrod Brown (OH), and Jack Reedrn(RI) had spoken out strongly against the bill largely because it lacks arnmandate for affordable housing. </p

The bill would, like an earlier Senate billrnauthored by Mark Warner (D-VA) and Bob Corker (R-TN) and the so-called PATH Actrnawaiting a vote in the House, wind down government sponsored enterprises FanniernMae and Freddie Mac.  Unlike the PATH Actrnwhich would provide loan guarantees only for FHA loans, S 1217 would establishrna new agency, the Federal Mortgage Insurance Corporation (FMIC) which wouldrnregulate a secondary market for selling loans and mortgage-backed securitiesrnand provide a catastrophic guarantee that would kick in only after mandatory levelsrnof private capital were exhausted.</p

Observers feel that Johnson needed arnstronger committee vote, especially one with more yes votes from Democrats inrnorder to convince Senate Majority Leader Harry Reid to bring the bill to thernfloor.  The PATH Act which was voted onrnfavorably by the House Financial Services Committee has similarly been waitingrnfor several months for a full House vote but Speaker John Boehner has thus farrnfailed to bring it to the floor.   Thosernobservers feel that PATH, if it pass the House would not do so in the Senaternbecause it virtually eliminates the government from housing finance.  Similarly the Senate bill stands littlernchange in the house because of the catastrophic FMIC backstop.</p

Prior to the vote but apparentlyrnanticipating its outcome Johnson released a statement which said in part:  “Whenrnwe opened up this markup two weeks ago it appeared we were very close torngaining additional bipartisan support for this bill. That being the case, Irnconsulted with Ranking Member Crapo and other members of the Committee andrndecided to recess for a short time to take one last shot at finding additionalrnsupport. After exhausting every option to try and strike a deal quickly thatrnwould add votes at the committee level, I have concluded it is best to movernforward with the majority we have now in committee and continue working tornbuild support for the bill as it moves to the floor.”

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