Rep. Spencer Bachus (R-Ala.) called out the Democratic administration for missing the deadline to present a plan for the future of the government-sponsored enterprises, Fannie Mae
and Freddie Mac
He said the administration has been dragging its feet for three years already and accused it of ignoring a key cause of the economic crisis.
"While there is no legitimate reason for failing to have a plan, the Democrats always offer an excuse for not meeting deadlines, even those they impose themselves," Bachus said in a statement. "It is clear the administration cannot make any tough choice required to protect taxpayers."
The Treasury Department
is expected to release its white paper on the future of the GSEs soon, but it had originally been scheduled for a January release, which came and went without any recommendations. Some analysts anticipate the department will recommend an explicit guarantee
from the government on Fannie Mae mortgage-backed securities.
Bachus, who will be leading a series of hearings concerning the future of the GSEs in the coming weeks, said House Republicans have a plan to end the bailout of Fannie Mae and Freddie Mac. According to numbers included in the Republican document, that bailout has cost taxpayers approximately $146.9 billion.
Under the proposed plan
, Republicans named a series of goals for the restructuring of the mortgage finance industry. First, they want to re-establish the private capital market as a primary source of mortgage financing — a market which, they claim, has been shut out by the dominance of the GSEs. They also want to restore stability and liquidity to the secondary market for residential mortgages that dissipated when the market went sour.
Republicans are pushing to protect taxpayers from future bailout costs and to promote innovation and diversity in housing finance for consumer products.
To achieve these goals, the Republicans are proposing:
- To wind down Fannie and Freddie within four years
- To phase out conforming loan limits in high-cost areas over a two-year period
- To reduce Fannie and Freddie mortgage portfolio holdings by 25% a year for the next four years
- To implement capital requirements for the GSEs that are consistent with global standards in order to reduce leverage
- To establish a regulatory framework for a U.S. covered bond market
- To eliminate the maturity mismatch that allows Fannie and Freddie to fund long-term assets with very short-term borrowing
- To create an inspector general position for the Federal Housing Finance Agency, who would oversee the functions of the agency and submit regular reports on its status
- To move GSEs' spending onto the federal budget, as to promote transparency in accounting standards, and
- To immediately suspend compensation packages for senior executives of Fannie Mae and Freddie Mac
No one knows for sure how the GSEs will be restructured, if at all. In the February issue of HousingWire magazine, our team spoke with analysts, consumer groups and key players throughout the industry to get their opinions. Take a sneak peak here
Write to Christine Ricciardi
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