By Peter Schroeder
Partisan battle lines over what to do with troubled mortgage giants Fannie Mae and Freddie Mac were evident Wednesday at the first hearing of the new Congress to explore the nation's ailing housing system.
At the first meeting of the House Financial Services Committee's subcommittee overseeing Fannie and Freddie, there was broad agreement that something needs to be done with the current housing finance system, but that is where the agreement ended.
Republicans emphasized the need to quickly free taxpayers from Fannie and Freddie and for the government get to out of the housing business, while Democrats maintained that the government must play a role in supporting the housing system going forward.
Republicans repeatedly emphasized the need to get the government-sponsored enterprises (GSEs) off the back of the American taxpayer sooner rather than later and criticized Democrats for not addressing the housing giants in the massive Dodd-Frank financial reform law they pushed through in last Congress.
"What immediate steps can Congress take right now, this instant, to protect taxpayers, end the bailout, get private capital off the sidelines and reduce the government's exposure to the housing market?" asked Rep. Scott Garrett (R-N.J.), the panel's chairman.
In addition, several Republicans on the panel said the government needs to get out of the housing business altogether.
"Those who want to foster a system of continuing government guarantees in the secondary mortgage market certainly bear the burden of persuasion that we can somehow expect a different result," said Rep. Jeb Hensarling (R-Texas).
GOP lawmakers also repeatedly took the Obama administration to task for failing to offer its recommendations on what to do with the housing system. The White House was originally due to release a report of its findings at the end of January, but that deadline was pushed back to the middle of February.
Democrats adopted a defensive position, cautioning that any dramatic reforms must protect the availability of affordable mortgages while arguing it was Wall Street, not Fannie and Freddie, that was responsible for the housing crisis.
Rep. Maxine Waters (D-Calif.), the ranking member on the subcommittee, said she was not backing any specific plan yet, but she emphasized the need to protect 30-year, fixed-rate mortgages and that any plan allows broad access to the housing market for all qualified borrowers.
"Let's be clear, Fannie and Freddie did not start this crisis, and Fannie's and Freddie's affordable-housing policies did not cause the crash," said Rep. Keith Ellison (D-Minn.).
However, such defensiveness was not shared by the ranking member of the full committee, Rep. Barney Frank (D-Mass.).
Frank used his time to prod Republicans for holding a hearing exploring options for the housing finance system when, in the minority, they were pushing a plan from Hensarling that would wind down the GSEs within five years. Frank asked why Republicans were not now moving on the package.
"Apparently there's something about transitioning from the minority to the majority that induces some kind of legislative amnesia," he said. "I had not previously thought the majority was waiting around for the president to tell them what to do."
Hensarling responded to Frank's critiques, saying his legislation was "being refined" for the new Congress, and he took Frank to task for not proposing his own reforms to Fannie and Freddie when Democrats were in the majority.
"I do intend to reintroduce the bill, and it will be quite similar," he said. "At least there will be a bill."