Could it be possible both sides of the aisle work on lending fix?

 

A Bi-Partisan Fix to Lending: It's A Start

March 15, 2013

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Yes, I just saw it in action. Yesterday Republican Senators Bob Corker and David Vitter joined with Democratic Senators Elizabeth Warren and Mark Warner to introduce the Jumpstart GSE Reform Act.
This act may not mean much to the average reader, but it does two things that will hopefully kickstart a dialogue in Congress on the future of Fannie Mae and Freddie Mac. The act does two things:

1. It would eliminate the ability for congress to use the Guarantee fees (the fee charged to offset credit risk and passed on to every American borrower) as a method to pay for other unrelated government programs. This has been a real concern to many. In early 2012 Congress voted to extend the payroll tax cut and pay for it with guarantee fee increases. Every American household was charged 30 years of higher mortgage payments if they took out a Fannie Mae or Freddie Mac loan in order to extend the payroll tax cut for just a couple of months. As a matter of fact, the payroll tax cut extension was over before the fee was actually implemented. Using a 30 year tax on homeowners for a couple month extension struck me, and so many others, as symptomatic of the difficulty that congress has in really dealing with true budget challenges and the GSE "piggy-bank" seemed way too easy to them. This act, if passed into law, eliminates that as an option.
2. It would freeze the ability for treasury to execute a sale of the preferred stock, or alter it, without a comprehensive reform plan.

Many believe that the time has come to address the fact that both Fannie Mae and Freddie Mac have been in perpetual conservatorship for too long and that the Administration and Congress must deal with these two institutions futures and the future of the role of government in housing finance. The fact that this unlikely group of Democrats and Republicans joined together reflects that fact that this view is shared by those on the left and the right; industry and consumer advocates.
Insuring that we create a path for the return of private capital while also protecting the economy by insuring that there is a steady flow of capital to provide long term support for both rental and homeownership properties is critical to this nations economy. Moving on from this current and untenable state of conservatorship requires that we work to transition these entities to a more permanant future state. How this happens, even if it means replacing these companies with a more sustainable model, is the hard work that all stakeholders (consumer advocate, industry, academics, etc) all need to engage in.
The time is now and these four senators boldly took the first move. I hope congress supports this first step.
Photo: KamiGami/Shutterstock