Tuesday
May112010
Measure To Reform Fannie And Freddie Fails
Tuesday, May 11, 2010 at 1:01PM
A trio of Senate Republicans failed in their quest to put an end to the days of taxpayer bailouts for Fannie Mae and Freddie Mac.
The GSE (Government Sponsored Enterprise) Bailout Elimination and Taxpayer Protection Amendment, sponsored by Sens. John McCain (R-Ariz.), Richard Shelby (R-Ala.) and Judd Gregg (R-N.H.), would have forced the government to relinquish control of the two government-backed mortgage giants within two years.
Recently, Fannie Mae, which lost $13.1 billion during the first quarter of this year, asked the government for an additional $8.4 billion to stay afloat. Similarly, Freddie Mac asked the government for $10.6 billion in funds after reporting a loss of $8 billion for the quarter. Combined, the two companies have borrowed $145 billion from the Treasury Department since the government took complete ownership of them during the heart of the nation’s financial collapse in 2008.
"We are not saying that Freddie and Fannie have to go out of business. We're saying we want them to be a business that is on a level playing field with other private sector competitors," said McCain to reporters today, hours before his amendment went down in a 56-43 vote.
Though most Republicans supported the item, it had its fair share of skeptics.
First, critics, including many Democrats in Congress, believed the measure would unwind Fannie and Freddie so quickly that it would create chaos throughout the entire housing market. House Financial Services Committee Chairman Barney Frank (D-Mass.), who has said he supports reforming the two GSE’s, called the amendment a huge gamble.
“Simply to abolish Fannie and Freddie...and not do anything to replace the functions they are now performing with a conservatorship, would be a disaster for housing, and therefore for the economy as a whole,” he said last week.
Furthermore, the liberal Center for American Progress recently referred to the legislation as “The Credit Crunch Restoration Act of 2010,” arguing that by abolishing a large chunk of the mortgage backing industry, millions of Americans would lose access to credit.
The GSE (Government Sponsored Enterprise) Bailout Elimination and Taxpayer Protection Amendment, sponsored by Sens. John McCain (R-Ariz.), Richard Shelby (R-Ala.) and Judd Gregg (R-N.H.), would have forced the government to relinquish control of the two government-backed mortgage giants within two years.
Recently, Fannie Mae, which lost $13.1 billion during the first quarter of this year, asked the government for an additional $8.4 billion to stay afloat. Similarly, Freddie Mac asked the government for $10.6 billion in funds after reporting a loss of $8 billion for the quarter. Combined, the two companies have borrowed $145 billion from the Treasury Department since the government took complete ownership of them during the heart of the nation’s financial collapse in 2008.
"We are not saying that Freddie and Fannie have to go out of business. We're saying we want them to be a business that is on a level playing field with other private sector competitors," said McCain to reporters today, hours before his amendment went down in a 56-43 vote.
Though most Republicans supported the item, it had its fair share of skeptics.
First, critics, including many Democrats in Congress, believed the measure would unwind Fannie and Freddie so quickly that it would create chaos throughout the entire housing market. House Financial Services Committee Chairman Barney Frank (D-Mass.), who has said he supports reforming the two GSE’s, called the amendment a huge gamble.
“Simply to abolish Fannie and Freddie...and not do anything to replace the functions they are now performing with a conservatorship, would be a disaster for housing, and therefore for the economy as a whole,” he said last week.
Furthermore, the liberal Center for American Progress recently referred to the legislation as “The Credit Crunch Restoration Act of 2010,” arguing that by abolishing a large chunk of the mortgage backing industry, millions of Americans would lose access to credit.
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