CUs Chime In Against GSE Amendment
Credit unions were among the groups that came out against last week's attempt to add the reform of Fannie Mae and Freddie Mac to the financial regulatory reform package in the U.S. Senate.
Government-owned Fannie Mae and Freddie Mac have received over $137 billion from the Treasury since they were seized and put them into conservatorship in August 2008. In addition, Fannie Mae has requested another $8.4 billion in federal aid.
The bailout money covered losses on mortgages that the two GSEs bought or guaranteed during the housing boom and has allowed them to continue buying loans. But it also made them targets for public anger and demands that Congress do something to get at least some of the taxpayers money back and prevent another bailout.
Three Republican senators last week launched an effort to end the government's conservatorship within two years and to completely end any government association with the two institutions within five years. But U.S. Treasury Secretary Timothy Geithner is on record as favoring some sort of government role with Fannie and Freddie, and Democrats have promised to move onto reforming the two mortgage firms after Congress has passed financial regulatory reform.
Sen. John McCain (R-Ariz.), joined by other Republican senators, offered an amendment that would end government backing for the two mortgage finance giants.
"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," said McCain.
Sen. Richard Shelby (R-Ala.) said, "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. "
But the amendment went down to defeat 43 to 56 on May 12, in part because of the outcry the measure drew from housing, banking and credit union groups who opposed it, suggesting that a reform measure for Fannie and Freddie needed more consultation and debate.
NAFCU made a similar point in a May 10 letter to the Senate leadership in opposition to the amendment. "We realize reforms are needed and believe that Fannie Mae and Freddie Mac will need to transition out of their current conservatorship into a new model," NAFCU wrote. "However, we feel that this is an issue of great magnitude and importance and deserves to be fully vetted and analyzed through the congressional process. We do not believe that the Restoring American Financial Stability Act is an appropriate measure to which to address GSE reform."
Ryan Donavan, CUNA vice president for legislative affairs, said the association opposed the amendment for much the same reason NAFCU had-the issue just needed more time and study and thought.
"This is a topic that I think we expect Congress will address in a more comprehensive and considered way," Donovan said, adding that CUNA joined with other interested groups, such as Realtors, mortgage bankers and housing advocates in believing that an approach like adding an amendment to an existing bill was not the way to go.