Senators to Watt: Let Congress Lead on GSE Reform

A bipartisan group of six senators last week cautioned FHFA Director Mel Watt that taking steps toward moving Fannie Mae and Freddie Mac out of conservatorship without comprehensive reform would “perpetuate the pre-crisis practice of socializing losses and privatizing gains.” The lawmakers, led by Bob Corker (R-Tenn.) and Mark Warner (D-Va.), added that they hope to reengage Congress on the issue in the months ahead, and they urged FHFA to take steps in the meantime to protect taxpayers by shifting risk into the private market and winding down the Fannie and Freddie’s investment portfolios.

The senators’ letter came after ABA and other financial and housing associations last month called on Congress to tackle comprehensive reform of the GSEs and fix the structural issues that led to the collapse of the housing finance system during the financial crisis. “[T]he current state of conservatorship has provided stability, but policymakers and stakeholders need to continue to work together on the important efforts to advance housing finance reform through a legislative solution,” the groups said. “Absent reform, we run the risk of continuing to kick the can down the road without ensuring ongoing access to mortgage credit for millions of future homeowners.”