For months, the GSE reform measure known as Johnson-Crapo has been under attack. The bipartisan bill would wind down Fannie Mae and Freddie Mac in the next five years and was set to be marked up by the Senate Banking, Housing and Urban Affairs committee late last month.
The markup was delayed to allow the bill’s authors Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, to garner more support amongst the committee’s members.
The delay was only supposed to be for a week. But now it seems that the delay may be an indefinite one that eventually leads to the bill’s demise. That’s because six key Democrats whose support is crucial for the bill’s passage in Congress have decided that they will no longer support the bill as written.
According to Bloomberg, Charles Schumer of New York, Sherrod Brown of Ohio, Jeff Merkley of Oregon, Robert Menendez of New Jersey, Elizabeth Warren of Massachusetts, and Jack Reed of Rhode Island held a private meeting and agreed to pull their support for Johnson-Crapo.
When the bill’s markup was delayed on April 29, Crapo said that he was confident that bill would have passed through the committee with the minimum number of votes, but wanted to try to engender more support to send a stronger message.
“I look forward to working with my colleagues in the coming days, to listening to their questions or concerns to help us find a bipartisan consensus with even stronger votes,” Crapo said at the time.
But with the six Democrats pulling their support for the bill, a bipartisan consensus may not be enough.
Over the last few months, some have suggested that GSE reform is dead until after the mid-term election. Some have said that GSE reform will drive mortgage rates through the roof. Others have said that the GSE reform discussion will stretch into 2017, at least.
Johnson-Crapo has certainly had its detractors since it was initially announced. Some say it is the “Obamacare” of GSE reform and others have called it “not the cure, but another form of the same illness” that drove the country’s economy into crisis in 2008.
“Housing finance reform remains the most significant piece of unfinished business from the 2008 financial crisis,” Crapo said in a statement his bill was delayed in committee. “Fannie Mae and Freddie Mac greatly contributed to the housing bubble, the financial crisis, and the dramatic government intervention that resulted. The current system is unsustainable, leaves taxpayers exposed to potentially trillions of dollars in liabilities, and has left the mortgage market in a state of limbo, forcing private capital out of the market.”
With today’s developments, it appears that Fannie and Freddie may be sticking around for bit longer than Crapo might like.