Senators Delay Action on Fannie Mae Amid Democrats’ Rift
Senators Delay Action on Fannie Mae Amid Democrats’ Rift
U.S. Senate Banking Committee leaders indefinitely delayed consideration of a bipartisan bill to wind down Fannie Mae (FNMA) and Freddie Mac (FMCC)as rifts among the panel’s Democratic majority threaten to stall the measure.
Senator Tim Johnson, the South Dakota Democrat who leads the committee, and Senator Mike Crapo of Idaho, the top Republican, postponed a work session set for today as they try to win the support of at least a few of the half-dozen Democrats on the panel who haven’t yet embraced it, according to a committee aide who spoke on condition of anonymity.
The panel will hear opening statements today and break without voting, according to the aide, who requested anonymity and isn’t authorized to comment publicly.
The Johnson-Crapo bill would replace the the U.S.-owned companies over five years with federal insurance for mortgage bonds that would kick in only after private investors were wiped out. Current shareholders of Fannie Mae and Freddie Mac would be in line behind the U.S. in getting any compensation from the wind-down.
The measure has the backing of six Democrats and six Republicans on the 22-member committee. It needs more support from Democrats before Senate Majority Leader Harry Reid, a Nevada Democrat, will allow the full Senate to vote on it.
Some senators who haven’t yet signed onto the bill, including Chuck Schumer of New York, Jeff Merkley of Oregon and Elizabeth Warren of Massachusetts, are seeking changes, including stronger protection for lending in disadvantaged communities and limits on the authority of the a new regulator the bill would create.
Starting Over
If there is no vote before the Senate leaves for the summer recess in July, the measure is likely dead. With Johnson stepping down as panel chairman and control of the Senate in doubt ahead of November elections, the effort to remake the housing finance system probably would have to start over in 2015.
Restructuring the mortgage market is the largest piece of unfinished U.S. business from the 2008 credit crisis, when regulators seized Fannie Mae and Freddie Mac as they careened toward insolvency. The companies, which buy mortgages and package them into securities, were bailed out with $187.5 billion from the Treasury while backing a growing share of mortgages as private capital dried up.
To contact the reporters on this story: Clea Benson in Washington atcbenson20@bloomberg.net; Cheyenne Hopkins in Washington atchopkins19@bloomberg.net
To contact the editors responsible for this story: Maura Reynolds atmreynolds34@bloomberg.net Gregory Mott, Lawrence Roberts
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