BLOG VIEW: No one was particularly surprised when the Obama administration announced that it would not meet its Jan. 31 deadline to provide a report on the future of the government-sponsored enterprises (GSEs). After all, the administration has been in power for two years and has yet to offer anything resembling an idea of how to speed the GSEs out of conservatorship while restoring stability to the housing finance markets. And in the cases when some people have tried to force the issue into the open for discussion – most notably, during the debate on the Dodd-Frank Act – the administration pulled a fingers-in-the-ears routine while its Capitol Hill lieutenants slapped down the discussion.
Since last November's election, however, the federal power environment has shifted to a point where there can at least be a start to serious conversations on GSE reform and other matters relating to federal housing finance policies. Whether these conversations will bring about any significant action remains uncertain, considering that the Executive Branch and the Republican leadership in Congress are not talking to each other – instead, they appear to be talking at each other, past each other or to themselves.
MortgageOrb has reported on several news stories that detailed this breakdown in communications. Last week, we reported that Rep. Randy Neugebauer, R-Texas, chairman of the oversight subcommittee of the House Financial Services Committee, was concerned that $410.7 million in taxpayer money was spent on legal expenses incurred by Fannie Mae and Freddie Mac since they were put into conservatorship in September 2008. This figure includes $162.4 million spent on securities-related lawsuits and indemnification agreements for former executives of Fannie Mae and Freddie Mac.
Neugebauer's agitation was not shared by Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA). DeMarco approved the hoisting this hefty legal bill on the taxpayers, saying, ‘I have concluded that the advancement of such fees is in the best interest of the conservatorship.’ Sadly, no one pressed DeMarco for a specific reason of how it was anyone's best interest, nor did he volunteer to explain himself further.
MortgageOrb also reported that Neugebauer sent a four-page letter to Elizabeth Warren requesting details on the depth and scope of the ongoing activities within the Consumer Financial Protection Bureau (CFPB). Neugebauer complained that Congress has received no update on too many aspects of the CFPB's creation, ranging from current budget projections to hiring practices to the status of putting a director in charge of the new agency. Neugebauer requested that Warren provide information to his committee by today – she never publicly acknowledged his inquiry, but we'll keep you posted if she actually meets his requested deadline for a reply.
Elsewhere on Capitol Hill, Rep. Darrell Issa, R-Calif., invited Treasury Secretary Timothy Geithner to appear at a Jan. 26 hearing, with the hopes of getting questions answered, on the Troubled Asset Relief Program (TARP). Geithner brushed off Issa's request and sent Acting Assistant Secretary Tim Massad to field the inquiries. A Treasury Department spokesperson later stated that Geithner would make himself available at ‘the earliest possible date that is mutually convenient.’ However, it was never clear why this particular date was not convenient to Geithner – although as any C-SPAN addict will confirm, Geithner clearly does not enjoy being asked by House committees to explain his actions.
If the Obama administration can be faulted for being evasive and elusive, we should also point out that the Republicans in Congress haven't exactly been willing to meet the White House at the halfway mark. Republican senators blocked two key regulatory appointments in the last Congress – Joseph A. Smith Jr. as the proposed director of the FHFA and Nobel laureate economist Peter Diamond to the Federal Reserve Board of Governors. Neither appointment could even vaguely be defined as controversial, let alone politically extreme, yet both men were humiliated by senators that seemed more interested in playing politics than shaping policy. (On Friday, Smith asked for his name to be withdrawn from FHFA consideration.)
It also doesn't appear that the Republicans are even listening to each other. Rep. Scott Garrett, R-N.J., chairman of the U.S. House Financial Services Subcommittee, said that GSE reform cannot be rushed, adding, ‘[We have] not established a specific time frame for winding them down.’ Yet Rep. Jeb Hensarling, R-Texas, plans to introduce legislation to transfer Fannie Mae and Freddie Mac's role to the private sector within five years, with no future federal guarantees.
The result of the mess will certainly be the worst possible outcome: the continuation of the federal status quo. GSE reform will require a consensus that will have great difficulty taking root in the current political climate. The dithering in the Executive Branch, the mix of petulance and disorganization from the Republicans in the House and the lack of outrage from the general public will ensure that despite all of the commotion and noise, nothing will change.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
