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Senators Introduce Bill To Prohibit G-Fee Hikes Being Used For Spending
A bi-partisan group of Senators hasrnintroduced legislation that would prohibit any increase in the guarantee fees</blevied by Freddie Mac and Fannie Mae (the GSEs) from being used to offset otherrngovernment spending. The bill would alsornrestrict the sale of stock in the two companies currently held by the U.S.rntreasury from being sold without congressional approval.</p
The bill entitled Jumpstart GSE Reform Act was introducedrnby four members of the Senate Banking,rnHousing, and Urban Affairs Committee, Bob Corker (R-TN), Mark Warner (D-VA),rnElizabeth Warren (D-MA), and David Vitter (R-LA).</p
As drafted, the purpose of the legislationrnis “To provide certainty that Congress and the Administration will undertake substantivernand structural housing finance reform, and for other purposes,” Other thanrnthere and in the title, the draft makes no other mention of GSE reform. </p
The Strategic Plan developed by thernFederal Housing Finance Agency, conservator of the GSEs envisions slowlyrnraising the guarantee fees (g-fees) which the GSEs are required to charge, lessrnas a source of operating revenue than as a tool to encourage the return ofrnprivate money to the mortgage market. Thernproposed legislation would prohibit any of these increases from being used to offsetrnother government spending. The extension of the temporary payroll taxrnreduction signed into law in December 2011 was paid for in part by an increasernin g-fees authorized by the same legislation. rnAdditional increases have been mentioned several times as a fundingrnsource for other programs.</p
When the GSEs were placed inrnconservatorship in August 2008, preferred shares in the two companies were takenrnby the Treasury as collateral for the substantial financial support they intendedrnto and have provided. This stock isrnwithin Treasury’s discretion to sell or dispose of by any other means. The new bill would prohibit the sale “untilrnsuch time as Congress has passed and the President has signed into lawrnlegislation that includes a specific instruction to the Secretary” to do so. </p
Corker said, “The reality is that ifrnCongress were to spend ‘g’fee’ revenue from the GSEs on other programs,rnreforming these mortgage behemoths would become nearly impossible. At thernsame time, if Treasury were to decide to sell its preferred share investmentrnwithout Congress having first reformed our housing sector, we would justrnbe returning to a time where gains are for private shareholders and losses arernfor taxpayers. Neither of these is an acceptable outcome.”</p
“We know our housing finance systemrnis not sustainable in its current form, and this legislation will keep us on a pathrnto accomplish real reforms,” Warren said. ‘We believe that as we transitionrnFannie and Freddie out of their present roles, we need to think about thernsystem in its entirety. The guarantee fee should not be mixed with otherrnfunding needs, and the preferred shares should be handled as one step within arnmulti-year process. It has been nearlyrnfive years since the financial crisis, and it is past time to reform Fannie andrnFreddie. That means removing the obstacles and starting a bipartisan effort torntake on housing finance reform this Congress.”
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