Tags: Shelby | Senate | mortgage | finance

Bizarre Senate Banking Committee Markup on Housing Finance Resumes — Part II

By    |   Tuesday, 20 May 2014 07:57 AM

As reported in the previous article, Senate Banking Committee Chairman Tim Johnson, D-S.D., called the committee back to report out S. 1217, the "Housing Finance Reform and Taxpayer Protection Act."

While the bill was approved, the vote was by a narrow margin of 13-9, with half of the Democrats voting no, most because they have created expectations as to what the bill would deliver to constituents still upset about the Wall Street bailouts that the bill does not meet.

This article is devoted to one of the few highlights of an otherwise desultory session — the impassioned dissent of former Chairman Richard Shelby, R-Ala. Somehow Shelby got 10 minutes to deliver the entire statement at the same time Johnson was urging senators to keep their statements short. For example, Sherrod Brown, D-Ohio, was given only two minutes, a limit the senator took in good humor.

Three explanations come to mind as to how this could happen. One is deference to a former chairman; second is that Shelby may have threatened to offer amendments that would have taken more time, then withdrawn them in return for the speaking time; and the third is that the Senate is a club, and sometimes extraordinary courtesy asserts itself.

Shelby seized on the recognition given by the ranking Republican, Michael Crapo of Idaho to the "stakeholders" who helped draft the bill. Readers may recognize this as a code word for what this writer calls the "Housing Finance Industrial Complex." Shelby asked, what about the taxpayers who were supposed to be protected by the Taxpayer Protection Act? He questioned whether they even had a seat at the table.

Shelby gave his version of the narrative of the financial crisis, blaming it on the very mortgage business that is the subject of this bill, on the financial regulators and on Congress. He chided the majority for failing to address mortgage finance in the Dodd-Frank bill, while faintly commending the proponents for addressing the issue. He assured them that he is in favor of reform in principle, but then proceeded to pull the bill apart, questioning whether it represents "a better mousetrap" than does the current circumstance, in which Fannie Mae and Freddie Mac dominate the mortgage market as "wards of the state" with virtually no capital.

He identified the main issue as whether the government should continue to back the mortgage market with a guarantee in any form, a question he insisted remains unsettled.

Shelby called for any government backstop to be accounted for on budget, "without gimmicks," not another federal "slush fund."

According to Shelby, the proposed Federal Mortgage Insurance Corp. (FMIC), which he called "the centerpiece of the bill," would wield powers rivaled only by the Federal Reserve itself in taking responsibility for maintaining liquidity in the housing market, and he reminded his colleagues that this policy led to a nightmare, rather than a dream, for many Americans.

Especially damning was Shelby's accusation that the 10 percent capital requirement that is supposed to give comfort to taxpayers can be waived, so that, in effect, the bill would fall short of Basel capital standards and not require any real capital at all. He followed it up by noting that the bill would allow the FMIC, in collaboration with the Fed, Treasury and the Department of Housing and Urban Development, to bail out the mortgage industry in "unusual and exigent" circumstances.

Appearing astonished, Shelby reminded senators that this is the same language the Fed resorted to as authority for bailouts in 2008.

Thus, what Shelby is trying to do is warn that this so-called "reform" bill is the product of the same people, with the same ideas, who hatched the ongoing crisis of 2008. He is trying to make it just a little more difficult for proponents to bring the bill up on the Senate floor this year.

(Archived video can be found here.)

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Robert-Feinberg
As reported in the previous article, Senate Banking Committee Chairman Tim Johnson, D-S.D., called the committee back to report out S. 1217, the "Housing Finance Reform and Taxpayer Protection Act."
Shelby, Senate, mortgage, finance
648
2014-57-20
Tuesday, 20 May 2014 07:57 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved