Search Form
First, enter a politician or zip code
Now, choose a category

Public Statements

Senators McCain, Shelby, And Gregg Introduce The GSE Bailout Elimination And Taxpayer Protection Amendment

Press Release

Location: Washington, DC

U.S. Senators John McCain (R-AZ), Richard Shelby (R-AL), and Judd Gregg (R-NH) today introduced the GSE (Government Sponsored Enterprise) Bailout Elimination and Taxpayer Protection Amendment. The amendment puts in place an orderly transition period to end the conservatorship of both Fannie Mae and Freddie Mac and eventually requires each to operate -- without government subsidies -- in a fair and equitable manner with private sector competitors.

"The events of the past two years have made it clear that never again can we allow the taxpayer to be responsible for poorly-managed financial entities who gambled away billions of dollars," said Senator John McCain. "Fannie Mae and Freddie Mac are synonymous with mismanagement and waste and have become the face of "too big to fail'. The time has come to end Fannie Mae and Freddie Mac's taxpayer-backed slush fund and require them to operate on a level playing field."

"Today, I gladly joined Senators McCain, Gregg and other Banking Committee members in filing a true reform plan for Fannie Mae and Freddie Mac. Democrats for years blocked meaningful reform of these entities. It is nonetheless astounding that neither the Obama Administration nor Congressional Democrats saw fit to address these two institutions, which played such a large role in our financial crisis. Our amendment to the financial regulatory bill would provide: transparency and taxpayer protections, an end to their conservatorships, a stronger regulatory structure, and a responsible path for untangling the taxpayer. I look forward to working with my colleagues to pass this important amendment," stated Senator Shelby.

Senator Gregg stated, "For far too long, Fannie Mae and Freddie Mac have enjoyed an implicit government guarantee, leaving American taxpayers on the hook when their risky deals go sour. Our amendment will provide for an orderly winding-down of the government's conservatorship of these companies so that they can operate without taxpayer backing in the future. It will also bring to light an accurate budgetary cost of these programs and include this cost in the federal budget each year while they remain under conservatorship, rather than continuing to sweep it under the rug. Our country's fiscal situation is on an unsustainable path. It is high time that the federal government come clean about the true costs of our financial commitments--especially for Fannie and Freddie, which are estimated to be at least $400 to $500 billion--so that we can begin to govern within our means."

The GSE Bailout Elimination and Taxpayer Protection Amendment would:

* End Date for Conservatorship -- Provides for a finite end to current conservatorship period for both GSEs at two years from the date of enactment. FHFA has an option to extend conservatorship for six months if FHFA Director determines and notifies Congress that adverse market conditions exist. If at end of conservatorship a GSE is not financially viable, FHFA must place that GSE in receivership. If GSE is financially viable, then it would be allowed to re-enter market under new operating restrictions.

* New Operating Restrictions for Post-Conservatorship -- Provides for changes to existing operating structure:

o Repeal of the affordable housing goals mandate for the GSEs;
o New limits for mortgage assets held on its books of no more than 95 percent of mortgage assets owned on December 31st of the prior year, reduced an additional 25 percent by the end of year one, reduced an additional 25 percent by the end of year two, and reduced to $250 billion by the end of year three;
o Strengthens capital standards, and allows them to be increased by the FHFA as necessary;
o Repeal of the temporary increases to conforming loan limit and high-cost area increases, and return to the $417,000 confirming loan limit for the first year, subject to annual adjustments by FHFA;
o Prohibition on the purchase of mortgages exceeding the median home price for that area;
o Minimum down payment requirement of at least 5 percent for all new loans purchased by the GSE, increasing to 7.5 percent in the second year and 10 percent in the third year;
o Repeal of the GSE's exemption from having to pay state and local taxes;
o Repeal of the exemption allowing GSE securities to avoid full SEC registration; and
o Assessment of fee on GSEs to recoup full value of the benefit due to guarantee provided by the federal government. GAO will conduct a study to determine current value of government guarantee.

* Required Wind Down of Operations and Dissolution of Enterprise -- Establishes a three year period after the end of conservatorship for GSEs to operate under new operating restrictions until government charter expires. Upon charter expiration, provides for a 10 year period through which the creation of a separate holding corporation and a dissolution trust fund for any remaining mortgages or debt obligations held by the GSE.

* Special Inspector General -- Establishes a Senate-confirmed Special Inspector General (SIG), within the Government Accountability Office, with responsibility for investigating and reporting to Congress on decisions made with respect to the conservatorships of Fannie Mae and Freddie Mac. The SIG would provide quarterly reports to Congress.

* Limiting More Bailouts of Fannie Mae & Freddie Mac -- While GSEs remain in conservatorship, reestablishes the Federal funding limit of $200 billion per institution for the GSEs, and requires the GSEs to reduce their portfolio holdings by 10 percent of the prior year's holdings. Also establishes an approval process for any further agreements that puts taxpayer money at risk.

* Budget Status -- Includes Fannie Mae and Freddie Mac as a part of the Federal budget as long as either institution is under conservatorship or receivership.

* Minimum Underwriting Standards -- Requires FHFA to establish minimum prudent underwriting standards for mortgage loans eligible for GSE purchase. Minimum requirements will include verification and documentation of income and assets relied upon to qualify the borrower for the mortgage loan and determination of borrower's ability to repay the mortgage loan.

Skip to top

Help us stay free for all your Fellow Americans

Just $5 from everyone reading this would do it.

Back to top