MS. BARTIROMO: Within the last 10 minutes, the Senate Banking Committee announced an agreement on a new housing bill to help troubled homeowners. Here are the details on the agreement from the ranking Republican on the Senate Banking Committee, Alabama Senator Richard Shelby, joining us right here in the studio at the NYSE.
Nice to have you, Senator.
SEN. SHELBY: Thank you, Maria.
MS. BARTIROMO: Welcome and congratulations on this new housing legislation. Take us through this agreement. What does this mean?
SEN. SHELBY: Well, I'll tell you fast that this is a victory for the taxpayers as far as the housing component is concerned. We're not funding this housing hope problem proposed by Congressman Frank and Senator Dodd with taxpayers' money. We're going to do it through a GSE affordable housing fund. That's number one.
Number two, this is the reformation of the government-sponsored enterprise, Freddie and Fannie. I've been working on it five years. Senator Dodd and I have been working on it very closely with our staffs in the last week or 10 days. We're glad that we got to the point of agreement today.
MS. BARTIROMO: So tell me where the money comes from, the cost of this, more details in terms of how this will play out.
SEN. SHELBY: We'll give you the details tomorrow.
But basically it comes -- part of the fund was Democratic proposal to create affordable housing fund out of some of the GSEs' earnings. And the affordable housing fund will be created. But because this is an emergency, a four-year deal, because of the housing crisis, revenues, taxpayers' money, we're going to use this money.
I think it's a win-win, a double-win for all of us.
MS. BARTIROMO: You know, so many people are saying, look, we need some kind of a floor being put under this market in order to really get through it. Do you see this as that floor? And how much time do you think it's going to take to actually stabilize?
SEN. SHELBY: Great question.
Do I know it's the floor? No, I don't. Nobody knows the floor yet. But this is going to be a step in the right direction.
It's going to create a program to where people that need to get their houses refinanced and can make payments, have got good credit, can do this. And this is what this is about as far as the housing fund is concerned. And I think it's a great compromise.
MS. BARTIROMO: Let me ask you your thoughts in terms of how long this takes, this cycle takes, to play out then. A lot of expectations that this is going, this upset is going, to go into 2009.
Would you agree with that? Is that a fair statement?
SEN. SHELBY: I think it's a fair statement. We're in 2008 now. It will go at least into '09, because a lot of these mortgages are going to be reset.
And what we're trying to do is create a system where they can refinance a lot of them; people can make some payments. And this is a step. I hope a lot of people use it.
MS. BARTIROMO: So that $300 billion, just to make sure I get this --
SEN. SHELBY: That's right.
MS. BARTIROMO: It's not just insuring mortgages.
SEN. SHELBY: No.
MS. BARTIROMO: It's actually going to be used for the refinancings.
SEN. SHELBY: That's right. It's part of the deal.
And the next step, I believe, we need to do, and Senator Dodd and I have got to work on, and perhaps we can do it on the floor, is the modernization of the Federal Housing Administration, will go along with this.
MS. BARTIROMO: Tell me about Fannie and Freddie in terms of funding some of the $300 billion number there for the insurance plan.
SEN. SHELBY: Well, out of this legislation was the creation of what the Democrats called affordable housing fund for low-income housing and other things.
And we thought, if we're going to create that fund, which I was -- had my differences to begin with -- I said, if we create this fund, why don't we use it for a real crisis that we're facing now? And then in four years or even less, you've got it for what you intended to use it for to begin with.
MS. BARTIROMO: Let me switch gears, Senator, and ask you about really what has been this unprecedented time in the market. We came so close to seeing a real upset in the financial system. Certainly, if you listen to Tim Geitner, that's what he would say, from the New York Fed. Do you think something like that could happen again? And the discount window opening for the investment banks, how does that change the regulatory oversight for investment banks versus commercial banks?
SEN. SHELBY: Well, I think, one, what the Fed did with Bear Stearns is unprecedented. They testified -- and you covered the hearing in Washington -- that they needed to do it and they had the legal authority to do it. And they've done it. Now, they're going to have to oversight. SEC's going to have to have closer oversight. And we on the banking committees in the House and Senate have got to do it because we do have a financial crisis and mainly it's lack of confidence. And perhaps what we're doing tomorrow is going to be a step in the ladder upward.
MS. BARTIROMO: And what's the timing on the news, once you -- on the new legislation tomorrow?
SEN. SHELBY: We will have a mark-up -- have a mark-up tomorrow and report it -- hopefully report it to the floor with a bipartisan vote. And then it will be up to the majority leader. Maybe we can do it next week.
MS. BARTIROMO: Because people want the GSEs to be shouldering more of this burden.
SEN. SHELBY: Absolutely. Absolutely. Otherwise this could be a risk to the taxpayer.
MS. BARTIROMO: Do you see the plan on the table -- back to this financial structure, in terms of the regulatory environment, do you see that the structure that Hank Paulson has been talking about, in terms of really giving more authority to the Fed and less authority to the SEC, the proper way to -- because some people worry now that the regulatory arm is swinging too far to one direction?
SEN. SHELBY: Well, I think myself that we should not give the Fed all the regulatory power. They have a lot of power now. They're our central bank and they're also the biggest bank regulator. And they have other powers. The SEC has got their role. I think that the proposals by Hank Paulson should be debated and they will be. But that's for another day.
MS. BARTIROMO: How do you feel about the current environment today? Do you think that we have begun to see some stability in terms of housing?
SEN. SHELBY: I hope so, but there's probably going to be a lot of foreclosures. There's a lot of money chasing some questionable loans. And everybody won't be saved. What we're doing with our legislation is where they've got some merit to a loan application, we can refinance it and get them out of the short-term stuff.
MS. BARTIROMO: Senator, good to have you on the program. Thanks very much.
SEN. SHELBY: Thank you, Maria.
MS. BARTIROMO: Congratulations on the legislation. Nice to see you.
SEN. SHELBY: Thank you.