Hagel, Sununu, Dole and Martinez Re-Introduce Legislation to Reform Oversight of Government Sponsored Enterprises
April 12th, 2007 - Washington, D.C. - U.S. Senators Chuck Hagel (R-NE), John Sununu (R-NH), Elizabeth Dole (R-NC) and Mel Martinez (R-FL) re-introduced legislation today to improve oversight of Government Sponsored Enterprises (GSE). Similar legislation was introduced in 2003 and 2005. The Senate Banking Committee passed this legislation in both the 108th and 109th Congresses.
“Fannie and Freddie have experienced multi billion dollar accounting restatements, paid millions in bonuses and salaries to their executives, paid millions of dollars in fines to their regulators, and spent over a billion dollars in consulting fees to clean up their financial mess which is still not cleaned up. We need a world class GSE regulator with the authority and resources to responsibly regulate these unaccountable GSEs. Our legislation re-focuses the GSEs on their Congressionally chartered housing mission. Congress must address this issue now,” Hagel said.
“The Office of Federal Housing Enterprise Oversight’s annual report to Congress makes clear that Fannie Mae and Freddie Mac continue to raise significant oversight concerns. With taxpayers on the line if either of these businesses fail, this news highlights the need for improved regulation of the GSEs. Fannie and Freddie hold nearly $1.5 trillion in debt; an independent regulator is essential to protect taxpayers and align the GSEs with their core mission. This bill would refocus the GSEs’ practices and investments on affordable housing, thereby reducing overall systemic risk,” Sununu said.
“Fannie Mae and Freddie Mac must be run properly and with adequate transparency and oversight. We will not tolerate an intentionally weak regulator, especially when the stakes are so high for American taxpayers, the housing sector and the economy as a whole,” Dole said.
“The actions of Fannie Mae and Freddie Mac pose a serious threat to our nation’s financial system. It’s clear our action is required,” said Martinez. “Congress must act to protect taxpayers and focus the GSEs back on their affordable housing mission. The reforms we propose take bold steps toward strengthening the regulation and supervision of the GSEs.”
The legislation would:
• Create an independent world class regulator to oversee the safety and soundness of the housing enterprises;
• Focus Fannie Mae’s and Freddie Mac’s $1.4 trillion portfolios back on their housing mission: to promote affordable housing;
• 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 to hold GSEs to their Congressionally chartered mission;
• Gives the regulator greater authority to limit lucrative severance packages or “golden parachutes” of executives who are removed for cause;
• Require the annual audits of Fannie Mae’s and Freddie Mac’s affordable housing programs to ensure that these programs support and strengthen the enterprises’ affordable housing mission;
• Strengthens Fannie Mae’s and Freddie Mac’s affordable housing goals;
• Require Fannie Mae and Freddie Mac to improve their financial disclosure;
• Not raise the conforming loan limits; and
• 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 by Federal Home Loan Bank members.