The GSE Reform Bill is Dead; Long Live the GSE Bill!

As Mortgage Servicing News went to press this month, the Bush White House put the final nail in the coffin of GSE reform by opposing a provision in the Shelby bill that would allow Congress to override a regulatory decision to place a housing GSE into receivership.

Introduced by Richard Shelby, R-Ala., chairman of the Senate Banking Committee, the legislation actually passed the panel before the Treasury Department (the White House, that is) torpedoed it the very next day by saying the provision was unacceptable.

Treasury Secretary John Snow, though, was 100% correct in his move to oppose the provision. What kind of a "world class" regulator would submit to the will of Congress? It sounds like a recipe for the "Keating Five" all over again.

As one mortgage industry veteran put it: "That gives Tom DeLay veto power. Why would you want to do that?" Tom DeLay, as most everyone in Power City, USA knows, is the very powerful House majority leader. In Washington, when this Texas Republican says "jump," the correct lobbyist response is: "How much money do you need, Mr. DeLay?"

The National Association of Home Builders was livid when they heard about the provision. They wanted no receivership powers whatsoever. Zippo. Fannie Mae, apparently, wasn't so livid and reportedly caved on the issue, agreeing to give Congress veto power.

You would figure that Fannie would be on the same team as NAHB on this issue, but the two parted ways. Why? As I write this, plenty of folks in Washington are scratching their heads, trying to figure out what went wrong. The only thing I can figure is that since Fannie donates so much money to Congress it's better to have control over the institution with veto power. Right?

But let's think about this for a moment. Fannie was OK with giving Congress veto power over receivership. The NAHB was not. Let's ask a basic question here: If Fannie (and Freddie) are as robustly healthy as they portray themselves to be, what are they (and the NAHB) so afraid of? If they have plenty of cash, receivership is really a non-issue. Right? Who says receivership will ever be needed? Is there something to be afraid of in regard to Fannie and Freddie that we don't know about? If there is nothing to fear, then give receivership powers to the regulator and to the regulator only.