By Alan Fram
Associated Press
WASHINGTON (AP) — Senate Republicans have introduced legislation that would quickly phase out government-run housing giants Fannie Mae and Freddie Mac as GOP lawmakers on both sides of the Capitol intensified their drive to shrink the federal role in the mortgage market.
Sens. John McCain, R-Ariz., and Orrin Hatch, R-Utah, unveiled a bill that within five years would dismantle Fannie and Freddie or cut them loose as completely private entities.
In the meantime, it would force them to take steps like charging higher fees and shrinking the size of their mortgage portfolios in hopes of opening up more of the mortgage market to private banks.
On the brink of collapse in September 2008 under the weight of the nation’s housing crisis, Fannie and Freddie were taken over by the government, which has so far spent $150 billion to keep them afloat.
The Obama administration and most Democrats agree that the two companies need to be wound down, yet many Republicans would do it faster and leave little or no federal role in the mortgage market, and the GOP has blended the issue into their overall drive to shrink government.
Fannie and Freddie don’t sell mortgages to consumers.
They help supply cash to the mortgage market by buying mortgages from lenders and packaging mortgages into securities that they then sell to investors.
McCain’s bill is identical to one introduced in the House in mid-March by Rep. Jeb Hensarling, R-Texas.
House Republicans last week introduced eight smaller bills, each designed to end government support for Fannie and Freddie and help private banks get a larger piece of the mortgage market.
With private banks still nervous about investing in housing, Fannie and Freddie — along with other federal agencies — have backed about nine in 10 mortgages in the past year.
The House subcommittee that oversees Fannie and Freddie plans to approve the eight measures on Tuesday. Republicans have decided to push those smaller bills in the face of the Democratic-run Senate showing little eagerness to consider sweeping legislation overhauling the housing finance system.
The eight measures would take steps like forbidding employees of Fannie and Freddie from being paid more than analogous federal workers, increasing the fees they charge to guarantee loans and ending the requirement that they subsidize lower-cost housing.
Even so, with many Republicans hoping to demonstrate their desire to make big changes in Fannie and Freddie, House Financial Services Committee Chairman Spencer Bachus, R-Ala., said that his full committee would consider Hensarling’s bill before it considers the eight smaller ones.
The measure by Arizona Sen. John McCain and Sen. Orrin Hatch of Utah would dismantle Fannie and Freddie or cut them loose as completely private entities within five years.
Meanwhile, it would force them to take steps like charging higher fees in hopes of opening up more of the mortgage market to banks.
The government took over Fannie and Freddie in September 2008 and has so far spent $150 billion to keep them afloat.
The Obama administration and most Democrats agree that the two companies need to be wound down, yet many Republicans would go further.
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