Over the last year, various groups, including community lenders, affordable housing advocates, civil rights groups, interested observers, and financial analysts, called for a change in governmental policy that would allow Fannie Mae and Freddie Mac to rebuild a capital base.
Those calls were only strengthened recently, when Freddie Mac reported a loss, its second in the last six months after four straight years of profits.
In the wake of Freddie Mac’s latest financial disclosure, one prominent analyst suggested that the issue of whether Freddie Mac will need another draw from the government is not a question of if, but a question of when thanks to the government-sponsored enterprises’ Congressionally-mandated dwindling capital base.
Now, the push to recapitalize the GSEs has a new voice, or several, as it were.
The National Taxpayers Union, which bills itself as a “nonpartisan, nonprofit organization working for lower taxes, smaller government, and economic freedom at all levels” and “the voice of Americas taxpayers,” joined 11 other “center-right” organizations in sending a letter to Congress requesting that they consider a bill to allow the GSEs to rebuild capital.
The fact that Conservative groups are now joining with groups like the National Community Reinvestment Coalition, the National Association for the Advancement of Colored People, and the League of United Latin American Citizens is an irony not lost on the Wall Street Journal’s John Carney, who pointed out NTU’s letter on Twitter.
Who would have ever thought we'd see conservative groups advocating for a restoration of Fannie and Freddie. https://t.co/4q4xBQLtPJ
— John Carney (@carney) May 12, 2016
In the letter, the groups, which include the 60 Plus Association, Americans for Prosperity, Americans for Tax Reform, Center for Freedom and Prosperity, Competitive Enterprise Institute, Conservative Leadership PAC, Generation Opportunity, Less Government, National Federation of Republican Assemblies, Taxpayers Protection Alliance, and The Jeffersonian Project, urge Congress to pass the “Housing Finance Restructuring Act of 2016.”
The “Housing Finance Restructuring Act of 2016” was introduced last month by Rep. Mick Mulvaney, R-S.C., and would end the so-called “Third Amendment Sweep,” which directs any profits from Fannie or Freddie’s operations to the Treasury.
Ending the Third Amendment Sweep would allow the GSEs to rebuild capital and would put them in position to absorb future losses, instead of needing another draw from the government.
And that’s exactly what the Conservative groups want.
“If there is one thing this presidential campaign has Americans are, depending on the particular policy issue, fed up with either inaction or overreach from Washington officials,” the groups say in their letter.
“The government’s handling of the massive government-sponsored enterprises, Fannie Mae and Freddie Mac, represents a failed mixture of both, and must be corrected now,” the groups continue.
The groups go on to ask Congress to make use of the remaining months of the current term to “use their time wisely” and authorize GSE reform.
“Ideally, Congress and the Administration would have agreed by now on a plan to phase out the oversized role government plays in housing finance,” the groups write.
“With an election six months away, there is no chance of that,” they continue. “But there is a pathway to protect the broader financial system as well as taxpayers. First, Congress can enact the Housing Finance Restructuring Act of 2016, which would allow Fannie and Freddie to retain capital, end government’s conservatorship of Fannie and Freddie once they reach 5% risk weighted capital, and require the GSEs to maintain capital buffers similar to other very large financial institutions.”
The groups also call for Congressional hearings to determine how exactly government decided to enact the Third Amendment sweep.
“Hearings should also be held to ascertain how the Third Amendment, now embroiled in legal controversy, was allowed to metastasize in the first place,” the groups conclude. “This Congress still has six months to serve its constituents and protect taxpayers by laying the foundation for GSE reform that must take place in earnest next year.”
For the group’s full letter, click here.
