Capital Markets and Government Sponsored Enterprises Subcommittee Chairman Scott Garrett announced today the Subcommittee will convene for a hearing entitled "Transparency, Transition and Taxpayer Protection: More Steps to End the GSE Bailout" on Wednesday, May 25th at 2 p.m. in room 2128 Rayburn.
The hearing continues the Financial Services Committee's ongoing effort to end the bailout of Fannie Mae and Freddie Mac and build a stronger housing finance system that encourages the private sector to reenter the mortgage market. The Subcommittee hearing will focus on seven proposals designed to scale back the role played by the GSEs in the U.S. mortgage market and limit further taxpayer exposure.
Subcommittee Chairman Garrett said, "I can think of no greater insult to the American taxpayers than to sit back and allow the bailout of Fannie Mae and Freddie Mac to continue unchecked. As Chairman of the subcommittee with jurisdiction over the GSEs, I am committed to ending the ongoing bailout and protecting taxpayers from future bailouts. Following up on the success of the first round of legislation, the subcommittee will hold a hearing on seven more bills carefully designed to tie the hands of Fannie and Freddie and free up space for the private market participants to step in."
Financial Services Committee Chairman Spencer Bachus said, "We are committed to protecting taxpayers from the unlimited bailout of Fannie Mae and Freddie Mac. The bills that will be the subject of the Subcommittee hearing will implement important and immediate reforms to ensure taxpayers are not forced to throw more money at Fannie and Freddie without key protections."
Since Fannie Mae and Freddie Mac were bailed out by the Federal government in September 2008, taxpayers have been forced to inject over $150 billion into both companies. This is far more than the pay-outs to AIG and other companies that received bailouts.
Committee Republicans have continuously offered solutions to end the bailout of Fannie and Freddie. In 2009, the Republican financial regulatory reform legislation included an exit strategy from Fannie and Freddie. This year, Republicans are again offering solutions to protect taxpayers and end the bailout of Fannie Mae and Freddie Mac. On April 6, 2011 the Capital Markets Subcommittee approved eight bills providing for immediate GSE reforms. The seven proposals that will be the focus of the Subcommittee hearing are:
1. Prevent Dividend Payment Decrease. The legislation, sponsored by Rep. Don Manzullo, prevents the Treasury Department from lowering the 10% dividend payment that Fannie Mae and Freddie Mac are currently paying to American taxpayers. This will ensure that the two entities continue to repay their debt to the taxpayers and that their ongoing bailout moves towards conclusion.
2. Abolish Affordable Housing Trust Fund. The legislation abolishes the Affordable Housing Trust Fund. With Fannie and Freddie under federal government conservatorship and losing billions of dollars per quarter, there is no need to have an additional requirement on them to send a portion of their revenue to special interest groups at the expense of American taxpayers. The bill is sponsored by Rep. Ed Royce.
3. Ensure an Exact GSE Replica is not Created. The bill amends the Housing and Economic Recovery Act (HERA) to ensure that if either Fannie Mae or Freddie Mac is placed in federal government receivership, a new quasi-governmental replica is not created in its wake. Under HERA, if Fannie or Freddie is placed into a federal government receivership, by law a new company is created with a government charter and private stockholders. This simply recreates the failed GSE-model. This legislation ensures that if the entities are put into receivership, their businesses are wound down and no new entity with taxpayer backing is set up. The bill is sponsored by Rep. Steve Stivers.
4. Require Disposition of Non-Mission Critical Assets. The legislation, sponsored by Rep. Robert Hurt, directs the Federal Housing Finance Agency (FHFA) Director to require Fannie Mae and Freddie Mac to dispose of all non-mission critical assets, including, but not limited to, patents and data. This would go a long way in helping to provide additional transparency and generate increased flow of private capital into our mortgage market.
5. Set a Bailout Cap for the GSEs. The legislation, introduced by Rep. Michael Fitzpatrick, sets a cap on the amount of money that the American taxpayers will be charged for the bailout of Fannie Mae and Freddie Mac. A cap on Fannie's and Freddie's liabilities will not only protect taxpayers, but will also ensure that the bailout of these entities is not unlimited.
6. Subject Fannie and Freddie to FOIA. The legislation, sponsored by Rep. Jason Chaffetz, subjects Fannie Mae and Freddie Mac to the Freedom of Information Act (FOIA). Since Fannie and Freddie were originally chartered by the federal government, they have been exempt from FOIA. Now that federal government conservatorship has essentially made them government companies, it only makes sense that both companies should be subject to FOIA standards.
7. Prohibit Taxpayer Funding of GSE Employee Legal Fees. The legislation, introduced by Rep. Randy Neugebauer, limits taxpayer exposure to the mounting legal expenses of Fannie Mae and Freddie Mac. Since 2008, the American taxpayers have spent more than $162 million defending Fannie, Freddie and their former top executives in civil lawsuits. This includes tens of millions of dollars for former executives who, according to their regulator, "knowingly and purposely manipulated earnings to increase their own compensation." This bill would minimize taxpayer liability to GSE legal fees by allowing FHFA to put limits on the advancement of legal fees for Fannie and Freddie executives involved in cases of fraud.