CRAPO STATEMENT AT BANKING HEARING TO EVALUATE FHFA
April 18, 2013
WASHINGTON – U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing entitled “Oversight of Federal Housing Finance Agency: Evaluating FHFA as Regulator and Conservator.”
"Thank you, Mr. Chairman.
"This September will mark the five-year anniversary of the Federal Housing Finance Agency (FHFA) taking Fannie Mae and Freddie Mac into conservatorship.
"As I noted in a previous hearing, when FHFA Director James Lockhart and Treasury Secretary Henry Paulson announced this action, Secretary Paulson described the situation as a “time out,” stating:
'We will make a grave error if we don't use this time out to permanently address the structural issues presented by the GSEs. In the weeks to come, I will describe my views on long-term reform. I look forward to engaging in that timely and necessary debate.'
"Instead of a “time out,” these conservatorships have been more akin to a perpetual state of limbo, which has no doubt created extraordinary challenges for their management.
"Director DeMarco, you are to be commended for your performance in the extraordinarily difficult and complex role that you were given by President Obama nearly four years ago.
"Your success in leading the FHFA to preserve the assets of Fannie Mae and Freddie Mac has positioned us to begin making the hard decisions of what to do with these entities.
"You have developed a knowledge and expertise that is shared by very few people, having been involved in the conservatorships of these highly complex institutions from the very beginning.
"You have further proven yourself to be a technical policy expert, rather than a political advocate.
"For these reasons, I can think of no one more qualified and better situated than you to manage these conservatorships and assist Congress in making the difficult decisions that lie ahead of us.
"Unfortunately, as we approach year five of these conservatorships with the GSEs beginning to report profits, I fear we may be in the midst of a closing window to make those decisions and to enact meaningful housing finance reform.
"Because of that, I thank you for your continued service during this pivotal moment, despite the many challenges you continue to face.
"Returning to the issue at hand for this hearing, there are a few areas I would like to highlight for our continued oversight.
"The annual scorecard released by the FHFA indicates a focus on the creation of a single securitization platform.
"I look forward to hearing more details about this undertaking. Specifically, how does this platform fit in with future entities in a financial world, post-housing finance reform?
"The scorecard also creates a goal for the continued shrinking of the current footprint within the market for Fannie and Freddie.
"As I noted in a previous hearing, the FHFA’s latest conservators report showed that the federal government—through Fannie, Freddie and Ginnie Mae—accounted for an astounding 100 percent of the Mortgage Backed Securities issued during the first three quarters of last year.
"This is extremely troubling, and I am interested to hear more details regarding how FHFA plans to address the domination of our mortgage market by the federal government.
"The recent profits reported by Fannie and Freddie also present new questions.
"Do the profits help with challenges such as personnel recruitment and retention, or do they present new challenges, given that the companies will remain in conservatorship no matter how they perform, absent Congressional action?
"I look forward to learning the answers to these and other questions during this hearing.
"However, I must reiterate that the most pressing question in this space is: How will we reform our nation’s housing finance system?
"The greatest aid that we can give both prospective and current homeowners is to provide clarity for market participants in regards to future mortgage finance.
"I am hopeful that the Administration will engage with us on this important topic in the coming months to shed further light on its position moving forward.
"Mr. Chairman, I believe our work together during the recent budget process shows that we have the ability to find common ground.
"Each one of us on this Committee came together and agreed that we needed to end the practice of using the GSEs as piggybanks to fund other parts of the federal government. In doing so, we were able to pass a budget point of order against it.
"I am very glad that we are working together on these important issues and I look forward to working with you and all of my colleagues on this Committee, once again, on a robust, bipartisan process to finally bring about an end to these conservatorships.