The Senate Banking Committee approved a bipartisan measure to overhaul Fannie Mae and Freddie Mac on May 15, setting the stage for a possible floor vote.
Voting 13 to 9, the bill is the first step in revamping the $10 trillion mortgage market, with seven Republicans joining six Democrats to move the bill out of committee. The bill is sponsored by Chairman Tim Johnson, a Democrat from South Dakota, and ranking member Mike Crapo, a Republican from Idaho.
The Johnson-Crapo bill would gradually wind down Fannie and Freddie over five years, replacing them with a new private mortgage bond issuer that would have government guarantees backed by a new entity called the Federal Mortgage Insurance Corporation. However, the liberal Democratic senators on the committee are opposed to the bill because it doesn’t do enough to ensure affordable housing.
Senate majority leader Harry Reid, D-Nev., has signaled he’s unlikely to bring the bill to the Senate floor without strong Democratic support. Liberal Democrats such as Elizabeth Warren of Massachusetts, Jeff Merkley of Oregon, Sherrod Brown of Ohio, Robert Menendez of New Jersey and Charles Schumer of New York opposed the bill.
Still, it’s uncertain whether the Johnson-Crapo proposal will make it to the Senate floor for a full vote this year, with the mid-term elections just six months away.
If Republicans take control of the Senate in November, then either Crapo or Sen Richard Shelby ,R-Ala., will most likely take the gavel. Shelby is opposed to the government’s role in housing finance and is expected to vote against the Johnson-Crapo bill.
If Democrats retain control of the Senate, Brown and Schumer are the top contenders to replace Chairman Johnson, who is retiring. Both Brown and Schumer voted against the bill.
Critics of the Johnson-Crapo plan claim that the bill isn’t overhauling Fannie and Freddie, it is just changing the name. Some opponents have gone as far as calling Johnson-Crapo the “Obamacare of Real Estate.”
Others see the Johnson-Crapo bill as a centrist approach in which the government will still play a role in supporting the mortgage market but less one than it does today.
But with so many interest groups — including Realtors, bankers, bond investors and politicians — jockeying for influence, reaching consensus is a difficult task.
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