House Committee passes eight bills to wind down Fannie Mae and Freddie Mac

No more golden parachutes

Days after the Federal Housing Finance Agency’s Inspector General denounced millions of dollars in executive bonuses at Fannie Mae and Freddie Mac, the House Financial Services Committee approved eight bills targeting the overhaul of Fannie and Freddie, one of which drastically cuts executive pay.

Republicans seek to reduce Fannie Mae and Freddie Mac’s role in the mortgage industry but this was a bipartisan effort, as the bills (and the 16 more to be voted on in coming months) are based on a white paper outlining three options for long term mortgage overhaul, authored by the Obama Administration.

Winding down Fannie and Freddie

The other bills increase oversight of the firms, slows new business activity, requires the two to abide by the new risk retention rules, officially abolishes affordable housing goals of the two, prohibits new debt issuance to the firms, and speeds up the winding down of their portfolios with one bill increasing fees Fannie and Freddie must charge to guarantee mortgages not as an effort to fundraise but to make competition more fair so the private sector can step in.

In a statement, House Financial Services Committee Chairman Spencer Bachus said, “Finally, Insurance and Housing Chairman Judy Biggert will begin a parallel legislative effort to reform the Federal Housing Administration. This effort will focus on legislation to clearly define FHA’s mission and prevent it from simply replacing Fannie Mae and Freddie Mac as a source of taxpayer exposure to the mortgage market.”

Fannie and Freddie have taken $134 billion in taxpayer funds since taken over by the government, and now the argument and possible delay will be over at what pace the firms will be shut down in the next five years. The ultimate irony is that one of the originators of the concept to ban Fannie and Freddie was no Republican- it was Barney Frank.