GSE Reform May Slip; ICBA Presents View Before Senate Banking
At the second recent hearing to examine proposals to restructure the regulation of the three housing government sponsored enterprises (GSEs)-Fannie Mae, Freddie Mac, and the Federal Home Loan Banks-the chairman of the Senate Banking Committee hinted that GSE reform legislation may not get done this year.
"The committee will work diligently to craft an appropriate reform package," chairman Richard Shelby (R-AL) said. "Whether we can do so this Fall is not clear." Shelby added, however, that the issue would remain a continuing "priority," likely signaling that the panel will return to the topic in 2004.
Similar efforts on the House side fell apart earlier this month when the House Financial Services Committee cancelled a hearing to mark up GSE reform legislation after the Treasury Department withdrew its support for the bill.
This week, Rep. Barney Frank (D-MA), the top-ranking Democrat on the House committee, also doubted a bill would get done this year, declaring that with congressional adjournment targeted for mid-November, "the clock [is] running out on this bill."
ICBA Stresses Need for Independent GSE Regulator. In testimony on Thursday, ICBA Lending Committee chairman Dale Torpey told the Senate Banking Committee that the ICBA does not believe the Treasury Department should direct the housing policy of our nation, just as it should not run its monetary policy. Torpey testified at the second hearing held by the Senate Banking Committee recently on proposals to improve regulation of the housing government-sponsored enterprises. Torpey is president and CEO of Federation Bank, a $115 million asset bank in Washington, Iowa.
"ICBA continues to hold the view that the FHLBanks should be regulated by a separate and independent agency," Torpey testified. Regarding proposals to bring the regulation of Fannie Mae and Freddie Mac under the Treasury Department, Torpey said, "We strongly urge Congress to make certain that any potential legislation contains appropriate firewalls and independence between Fannie and Freddie and the Treasury's politically-appointed policy makers."
Torpey stated that while it is not ICBA's first preference, ICBA may not oppose the concept of a new independent regulator for all three housing GSEs outside Treasury, depending on how key details are fleshed out. In particular, the unique ownership, operational and capital structure and mission of the FHLBanks would have to be recognized and preserved.
Torpey also urged Congress to carefully and fully consider the issues associated with housing GSE regulation before rushing to action. "We concur with the sentiments expressed by a number of members of this Committee that it is imperative that any regulatory restructuring be done right given its potential impact on the crucial housing sector of our economy and on community banks' continued ability to meet the lending needs of Main Street America," concluded Torpey.