Two former staffers on key congressional committees held out little hope Sunday that the fate of Fannie Mae and Freddie Mac will be settled before President Obama leaves office in 2016.
Much of the ground work for reforming the mortgage finance system is being laid now, said the staffers, who represented both political parties in the opening general session at the Mortgage Bankers Association’s annual convention in Washington.
Asked if Congress would agree on legislation by the end of the president's second term, Michael Borden, a former senior counsel on the House Financial Services Committee, answered flatly, “No.”
"Nevertheless," he adds, "it's really important that you stake out which issues matter by very aggressively engaging in the dialog that is taking place now."
"The odds go up" for mortgage finance reform in the last two years of the Obama presidency, “but that depends on the outcome of the 2014 elections,” he says.
At the same time, though, Fettig cautioned that it sometimes takes several Congresses to pass legislation as complex as GSE reform.
"It takes multiple years, in some cases multiple Congresses, to pass legislation lawmakers are comfortable with," Fettig says, noting that it took "four or five Congresses" before lawmakers finally came together to clear the huge Gramm-Leach-Bliley bill.
While it "might seem like inertia is gaining momentum," much of the groundwork that needs to be done to move reform legislation is being done in the trenches by Capitol Hill staffers who are meeting the various stakeholders, Fettig, who is now a partner in the Washington law firm of Porterfield, Lowenthal & Fettig, told the session.
The "political need" that existed in 2008 "to kill Fannie Mae and Freddie Mac" has largely gone away, he also pointed out. The GSEs are not the hot potato they used to be.
That in no way diminishes the resolve on Capitol Hill to deal with the issue, according to Borden, who is now counsel at Sidley Austin, another Washington law firm.
"Members think in terms of political risk," he says. "The leadership remembers how beaten up they were by Fannie and Freddie prior to the financial crisis, and they want them gone."
Rep. Jeb Hensarling, R- Texas, chairman of the House Financial Services Committee, has staked out his position on the issue and is not yet ready to negotiate, Borden says, speaking for the Republican side in what moderator Bill Kilmer, senior vice president of legislative and political affairs at the MBA, described as a bipartisan, bicameral conference session.
Hensarling doesn't have enough votes to move his version of GSE reform out of committee, he added.
There is “more wiggle room” on the Senate side, where Banking Committee Chairman Tim Johnson, D-S.D., has "only a year and a half left to leave his mark" on reform legislation before he retires, because five Republican members have already expressed their support for some sort of government guarantee, Fettig says.
However, it is still relatively early in the legislative process, Fettig says. "The process is underway, but we're in the first game of a seven-game series," he says. "So it is hard to predict the outcome."
"There is a real sense that Congress wants to get something done, but leadership cannot go to the floor with a bill unless there is clear support for it by the chairmen and ranking members,” Fettig says.
"You can't just bring a bill to the floor because a couple of members want you to," Borden says. "There are trillions of dollars involved."
Lew Sichelman is an independent journalist who has been covering the housing and mortgage markets for more than 40 years.
