House Republicans are calling for government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to be phased out within four years, according to a new list of legislative goals released by GOP leaders on the House Financial Services Committee.
As part of the process of winding down the operations of Fannie Mae and Freddie Mac, the Republican objectives advocate phasing out the elevated conforming loan limits in high-cost areas established by Congress in October 2009, reducing the mortgage portfolio holdings of the two GSEs by 25% a year over four years, and reducing leverage by phasing in capital requirements that are consistent with global standards for large, complex financial institutions.
The Republicans' guidelines also call for creating an Inspector General for the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac; putting the operations of the companies on the federal budget; and limiting the compensation of their employees to that of the highest-paid government employees.
‘The goals outlined here precisely identify the objectives of any credible GSE reform effort: ending government subsidies and protecting taxpayers from tens of billions of dollars in additional GSE losses,’ says Rep. Jeb Hensarling, R-Texas. ‘Fannie and Freddie are financial Frankensteins created in a government laboratory that were allowed to abuse their congressionally granted charters for their own private gain, while exposing taxpayers to more than $5 trillion of risk. It is imperative that we end the GSE bailout now and transition to a sustainable housing finance system free from the GSE duopoly."