The chairman of the House Financial Services Committee said he is skeptical of a forthcoming Senate proposal that would replace mortgage lenders Fannie Mae and Freddie Mac with a new government regulator.
In an exclusive interview with The Foundry today, Rep. Jeb Hensarling (R-Texas) said the Senate plan, announced yesterday, was unlikely to adequately address the government’s role in the housing market. Text of the Senate legislation is expected to be released soon.
“We now have a virtual government monopoly over our mortgage market. This is not healthy,” Hensarling told The Foundry.
The Senate plan, championed by Senate Banking Committee leaders Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho), has the backing of the White House. Even though it eliminates Fannie Mae and Freddie Mac, it would replace them with a federal regulator like the proposed Federal Mortgage Insurance Corporation.
“My fear,” Hensarling said, “is that if you leave a permanent government guarantee in the secondary mortgage market, you kind of put Fannie and Freddie in the witness protection program, give them a new name [and] reconstructive surgery, and unleash them on an unsuspecting public.”
As word spread about the deal yesterday, Heritage experts Norbert Michel and John Ligon explained why conservatives should be skeptical about the Johnson-Crapo approach. Taxpayers, they noted, are on the hook for more government guarantees today than when Fannie Mae and Freddie Mac failed in 2008.
“The goal,” Michel and Ligon write, “should be to get taxpayers off the hook by eliminating government guarantees in the housing market.”
They cited Hensarling’s Protecting American Taxpayers and Homeowners (PATH) Act as a better option. The Texas Republican, who has spent nearly a decade working on the issue, said he welcomed Johnson and Crapo’s contribution to the housing finance debate in the event it elevates the issue.
“It’s a positive sign that they have a bill, but I’m also concerned that any reform of this magnitude is a heavy lift,” he said. “It’s something that would have been a heavy lift last year. It’s an incredibly heavy lift this year, and I’m afraid that the window of opportunity for fundamental reform in this Congress is rapidly shutting.”
This story was produced by The Foundry’s news team. Nothing here should be construed as necessarily reflecting the views of The Heritage Foundation.