Senators Hagel, Sununu and Dole Re-Introduce Legislation to Reform Oversight of Fannie Mae & Freddie Mac
January 26, 2005
Washington, D.C. — U.S. Senators Chuck Hagel (R-NE), John Sununu (R-NH) and Elizabeth Dole (R-NC) re-introduced legislation today to improve oversight of Government Sponsored Enterprises (GSE). This legislation (S. 1508) was first introduced by the Senators in 2003. Their bill served as the vehicle for GSE reform legislation passed last year by the Senate Banking Committee. The Senate did not act on the Committee-passed legislation.
"Since we first introduced this legislation in 2003, the gross mismanagement of GSEs Fannie Mae and Freddie Mac has become glaringly apparent and dangerous. The need for a world-class regulator to increase the safety and soundness of the GSEs has never been clearer. A new independent GSE regulator is critically important and in the best interests of the housing and finance markets, investors and the American taxpayer,” Hagel said.
"We need a regulatory framework that will ensure the integrity of the GSEs and give confidence to financial markets and consumers. This bill will create a world class supervisor that will make Fannie, Freddie and the Federal Home Loan Banks better able to provide liquidity in the capital markets and allow access to affordable financing for America’s homebuyers. Given the current climate, we must seize the opportunity to pass legislation this year to produce a credible and capable regulator so that the GSEs operate in a safe and sound manner,” Sununu said.
"We know the problems within these organizations are not isolated but systemic and require a world class regulator with the authority to oversee their operations. Considering Fannie and Freddie’s debt level, and interest rate and operational risks being what they are, additional problems such as unexpected interest rate fluctuations could have devastating repercussions. We cannot tolerate a regulator that was intentionally made to be weak when the stakes are so high for the American people and our economy,” Dole said.
The legislation would:
- Create an independent world class regulator to oversee the safety and soundness of the housing enterprises;
- Give the new regulator the authority to close down a failing GSE and protect against a taxpayer bailout;
- Give the new regulator greater discretion in raising capital standards to protect against insolvency;
- Give the new regulator approval power over new programs and activities proposed by a GSE;
- Require the annual audits of Fannie Mae’s and Freddie Mac’s affordable housing programs to ensure that these programs support the enterprises’ affordable housing mission;
- End presidential appointments to the board of directors of Fannie Mae and Freddie Mac, and require all Federal Home Loan Bank directors to be elected.
"We cannot allow this real problem to continue to drift any longer. The Congress must act this year to pass responsible GSE reform legislation,” Hagel concluded.