Housing Finance Reform to Dominate Legislative Agenda in 2014
The new year is less than a week old, but lawmakers are already rapidly running out of time if they want to forge ahead on key initiatives such as housing finance reform in 2014.
With the midterm elections coming in November, Congress only has a relatively brief opening before partisan dysfunction, already at historic levels after fights over the budget, filibuster rule changes and other issues, grinds all legislative activity to a halt.
"The most important factor next year is the elections," said Daniel Crowley, a partner at law firm K&L Gates. "The closer we get to the elections, the less likely we are to see legislation. It's a very narrow window."
Yet the looming elections may also prod lawmakers to action, particularly because the 113th Congress has the dubious distinction of being the "least productive" Congress in history halfway through its session. Just 58 bills became law in 2013, including many that simply named post offices.
Below is a look at some of the banking issues in banking that lawmakers are likely to focus on in the months ahead.
Without a doubt, efforts to overhaul the housing finance market are likely to remain at the top of the congressional agenda in 2014.
"This year, let's face it—I really do think the elephant in the room is housing finance reform," Sen. Bob Corker, R-Tenn., said in an interview shortly before the Christmas recess.
Corker teamed up with Sen. Mark Warner, D-Va., to introduce a proposal last summer to unwind Fannie Mae and Freddie Mac and establish an explicit government backstop for the mortgage market.
Senate Banking Committee Chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, the ranking member on the panel, are now leading efforts to draft a bipartisan plan to overhaul the government-sponsored enterprises, likely drawing on the Corker-Warner bill. They failed to meet their stated goal of releasing legislation by yearend, but have pledged to move forward with a bill soon.
"Since it appears that we will need to prioritize finalizing this housing reform legislation, that will be number one," Crapo said in an interview about the panel's priorities.
Johnson added in a statement that the issue is "at the top of our list," noting that the committee "will continue to work tirelessly on reform as quickly as possible."
Analysts predict that banking leaders are likely to produce a proposal sometime in the first two months of 2014, opening the process back up to further discussion by lawmakers, industry officials and advocates. But how, and at what pace, efforts move from that point remains to be seen.
"There could be a markup possible sometime in the first quarter of the year, but after that it becomes very blurry," said Brian Gardner, an analyst at Keefe, Bruyette & Woods.
If the Banking Committee is able to advance legislation, all eyes would then turn to the White House and Senate leadership to decide whether or not to push the bill further, amidst other priorities like the budget, immigration and tax reform.
"The question will be, at what point does the Obama administration weigh in on GSE reform in a significant way? That could tilt the debate, depending on how they weigh in," said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association.
Ballentine added that there are additional procedural worries if and when a bill makes it to the Senate floor.
"I'm concerned that any vehicle that is moving on GSEs or something else will be used as a Christmas tree—that concerns outside of reform could bring it to a halt," he said. "Once you start getting a sense that that type of legislation has momentum, it may attract some barnacles that you won't be able to take off and that could be to the detriment of the legislation."
Over in the House, meanwhile, efforts to reform the market remain in limbo. Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, introduced his own, much more conservative plan to overhaul the GSEs this summer. The Protecting American Taxpayers and Homeowners Act quickly passed out of the banking panel before the August recess, but it has since stalled. Predictions are mixed on whether the plan could gain new life this winter with a vote on the House floor.
"I'm not sure I can control anything—my jurisdiction is the House Financial Services Committee, not the floor of our chamber—but I am encouraged by my conversations with our Republican leader who controls the floor, who is a supporter of the PATH Act," Hensarling said in a recent interview. "I'm hopeful we'd see something fairly early in the new year."
Some analysts suggested that the failure to get the bill to the floor during the fall is a reflection of divisions within the Republican caucus over backing a plan that is deeply unpopular with the housing industry. But others expressed optimism, pointing to Hensarling's sway with Republican leadership, along with the considerable distractions that popped up during the fall, like the fight over the budget and the government shutdown.
"I'm pretty confident that they'll find a way to get the PATH Act through the House," Crowley said. "This is Hensarling's first year as chairman and his first major legislative effort—he's part of the Republican leadership team and he commands a great deal of respect."
It's also possible that House and Senate efforts could play off of each other. If the Senate starts moving more seriously on a housing finance plan, the House could take notice and respond with its own vote. Even if disagreement remains, House Republicans may ultimately decide they would prefer to maintain as much negotiating power as possible in a possible conference with the Senate.
"Voting for the PATH Act is voting to move the process forward, to start the negotiations," said Crowley. "I think they will pass the bill to send a message with votes, recognizing they will have to compromise with the Senate."