Tighter Oversight OK'd for Mortgage Giants
By MARCY GORDON, AP Business Writer
Wed Oct 26, 7:29 PM ET
WASHINGTON - The House on Wednesday approved tighter oversight of the two largest buyers of home mortgages as majority Republicans also barred groups that run voter registration drives from getting money from a housing fund the companies would create.
The legislation, passed by a 331-90 vote despite White House opposition, would rein in Fannie Mae and Freddie Mac, the government-sponsored companies that combine to finance or guarantee more than three-quarters of U.S. home mortgages
The bill had wide bipartisan support in the spring after a House committee approved it. But that eroded somewhat by the final vote because of a later GOP proposal to restrict money from a fund financed by Fannie Mae and Freddie Mac for housing the poor and hurricane victims.
The White House opposes the legislation over a broader issue: The bill would not force the mortgage companies, both beset by accounting scandals, to reduce their massive investment holdings.
Signaling potentially tough negotiations ahead, Senate Banking Committee Chairman Richard Shelby, R-Ala., said the House measure lacks "core elements that must be included" in any legislation. A bill approved by his committee in July would mandate a reduction in the companies' holdings.
The restriction in the House bill would prohibit nonprofit community groups from getting such money if they have used their own funds for nonpartisan voter registration or get-out-the-vote drives, or, in some cases, lobbying in the last year.
Democrats contended the restriction would deny the poor the right to vote. They also portrayed the plan as part of an effort by conservatives that eventually could mean that such groups might not be able to get any dollars from any federal program in the future.
Supporting the Democrats' position were civil rights organizations, unions and faith-based groups, including the NAACP, the U.S. Conference of Catholic Bishops and the American Jewish Committee.
During House debate, the second-ranking Democrat, Rep. Steny Hoyer (news, bio, voting record) of Maryland, said the GOP-pushed restriction was "nothing more than a transparent attempt to disenfranchise voters who otherwise might not register to vote."
Opponents of the restriction said current laws provide sufficient safeguards; for example, there is a ban on lobbying with federal funds and a prohibition against charitable organizations engaging in partisan electoral activities. They also said the ban would violate constitutional free speech guarantees.
The ban, added by the chairman of the House Financial Services Committee, reflected a compromise with conservative lawmakers who wanted to prevent new housing money from going to organizations that oppose Republican policies.
Rep. Michael Oxley (news, bio, voting record), R-Ohio, told colleagues before the vote that the prohibition was intended "to ensure that they're not political front groups with a left or right agenda."
The overall bill would create a stronger federal regulator with authority over Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks, a nationwide system of 12 banks that provide money to home lenders in local communities.
The legislation also calls for the companies to devote a small percentage of their annual profits to financing housing for the poor. People affected by Hurricane Katrina would get priority. Based on those profits, the companies' contributions to the fund could reach the hundreds of millions of dollars.
Fannie Mae and Freddie Mac, in separate statements, said the House bill was "an important step forward" and that they favored the House's version.
The Bush administration opposes the House bill because it does not match a Senate measure that would require Fannie Mae and Freddie Mac to reduce their mortgage investment holdings, now worth a combined $1.5 trillion.
Federal Reserve Chairman Alan Greenspan has said those holdings must be diminished because their huge debt — some $2.5 trillion total — poses a potential danger to the U.S. financial system.
In a statement Wednesday, the White House said the House bill "fails to include key elements that are essential to protect the safety and soundness of the housing finance system and the broader financial system at large."
Fannie Mae and Freddie Mac, both publicly traded, were created by Congress to inject money into the home-loan market by purchasing mortgages and bundling them into securities for sale to investors.
Accounting debacles led to the ouster of top executives at Freddie Mac in mid-2003 and at Fannie Mae last year.
Last December, the Securities and Exchange Commission ordered Fannie Mae to restate its earnings back to 2001; the correction could reach an estimated $11 billion. The Justice Department is pursuing a criminal investigation.
Washington-based Fannie Mae is the No. 1 U.S. buyer and guarantor of home mortgages and the second-largest U.S. financial institution, after Citigroup Inc. Freddie Mac, based in McLean, Va., ranks as the second-largest home-mortgage buyer.
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Wed Oct 26, 7:29 PM ET
WASHINGTON - The House on Wednesday approved tighter oversight of the two largest buyers of home mortgages as majority Republicans also barred groups that run voter registration drives from getting money from a housing fund the companies would create.
The legislation, passed by a 331-90 vote despite White House opposition, would rein in Fannie Mae and Freddie Mac, the government-sponsored companies that combine to finance or guarantee more than three-quarters of U.S. home mortgages
The bill had wide bipartisan support in the spring after a House committee approved it. But that eroded somewhat by the final vote because of a later GOP proposal to restrict money from a fund financed by Fannie Mae and Freddie Mac for housing the poor and hurricane victims.
The White House opposes the legislation over a broader issue: The bill would not force the mortgage companies, both beset by accounting scandals, to reduce their massive investment holdings.
Signaling potentially tough negotiations ahead, Senate Banking Committee Chairman Richard Shelby, R-Ala., said the House measure lacks "core elements that must be included" in any legislation. A bill approved by his committee in July would mandate a reduction in the companies' holdings.
The restriction in the House bill would prohibit nonprofit community groups from getting such money if they have used their own funds for nonpartisan voter registration or get-out-the-vote drives, or, in some cases, lobbying in the last year.
Democrats contended the restriction would deny the poor the right to vote. They also portrayed the plan as part of an effort by conservatives that eventually could mean that such groups might not be able to get any dollars from any federal program in the future.
Supporting the Democrats' position were civil rights organizations, unions and faith-based groups, including the NAACP, the U.S. Conference of Catholic Bishops and the American Jewish Committee.
During House debate, the second-ranking Democrat, Rep. Steny Hoyer (news, bio, voting record) of Maryland, said the GOP-pushed restriction was "nothing more than a transparent attempt to disenfranchise voters who otherwise might not register to vote."
Opponents of the restriction said current laws provide sufficient safeguards; for example, there is a ban on lobbying with federal funds and a prohibition against charitable organizations engaging in partisan electoral activities. They also said the ban would violate constitutional free speech guarantees.
The ban, added by the chairman of the House Financial Services Committee, reflected a compromise with conservative lawmakers who wanted to prevent new housing money from going to organizations that oppose Republican policies.
Rep. Michael Oxley (news, bio, voting record), R-Ohio, told colleagues before the vote that the prohibition was intended "to ensure that they're not political front groups with a left or right agenda."
The overall bill would create a stronger federal regulator with authority over Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks, a nationwide system of 12 banks that provide money to home lenders in local communities.
The legislation also calls for the companies to devote a small percentage of their annual profits to financing housing for the poor. People affected by Hurricane Katrina would get priority. Based on those profits, the companies' contributions to the fund could reach the hundreds of millions of dollars.
Fannie Mae and Freddie Mac, in separate statements, said the House bill was "an important step forward" and that they favored the House's version.
The Bush administration opposes the House bill because it does not match a Senate measure that would require Fannie Mae and Freddie Mac to reduce their mortgage investment holdings, now worth a combined $1.5 trillion.
Federal Reserve Chairman Alan Greenspan has said those holdings must be diminished because their huge debt — some $2.5 trillion total — poses a potential danger to the U.S. financial system.
In a statement Wednesday, the White House said the House bill "fails to include key elements that are essential to protect the safety and soundness of the housing finance system and the broader financial system at large."
Fannie Mae and Freddie Mac, both publicly traded, were created by Congress to inject money into the home-loan market by purchasing mortgages and bundling them into securities for sale to investors.
Accounting debacles led to the ouster of top executives at Freddie Mac in mid-2003 and at Fannie Mae last year.
Last December, the Securities and Exchange Commission ordered Fannie Mae to restate its earnings back to 2001; the correction could reach an estimated $11 billion. The Justice Department is pursuing a criminal investigation.
Washington-based Fannie Mae is the No. 1 U.S. buyer and guarantor of home mortgages and the second-largest U.S. financial institution, after Citigroup Inc. Freddie Mac, based in McLean, Va., ranks as the second-largest home-mortgage buyer.
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