President Obama unveiled his long awaited budget plan on Wednesday, offering a more detailed look at the financial health of the Federal Housing Administration and promoting several key banking proposals.
More than five years after the financial crisis, the banking industry is no longer at the forefront of the Obama administration's agenda. That's reflected in Wednesday's budget proposal, which largely focuses on fiscal issues and would cut the deficit by $1.8 trillion over the next decade.
Still, the budget includes several industry reforms and increases spending for several agencies. Following are the key parts of the budget proposal:
FHA might need roughly $1 billion to shore up its capital reserves
Obama's budget blueprint estimates that the Federal Housing Administration will likely require $943 million in additional funding from the Treasury Department to shore up its capital reserves later this year.
The FHA has been struggling to meet its capital requirement for some time due to losses during the financial crisis, and it could be facing its first bailout in the agency's 79-year history.
The threat of a bailout in the budget proposal, meanwhile, could potentially galvanize Congress into passing needed agency reforms. Lawmakers in the House and Senate have held numerous hearings examining the agency's problems and mission.
The budget release represents "another catalyst to spur legislation on the Hill," said Edward Mills, a policy analyst at FBR Capital Markets, though there's still considerable disagreement among lawmakers about what the scope of that legislation should be.
It's possible that congressional reform, if successful, could prove fairly narrow, said Isaac Boltansky, a policy analyst at Compass Point Research & Trading.
"The immediate reaction is that this budget is not going to be as much of a driver for sweeping FHA reform, and instead I'm looking for it to at most be a catalyst for a very tailored bill out of Congress giving the FHA more latitude to administer its reverse mortgage program," Boltansky said.
There are no more details on GSE Reform
The budget once again touts the need for reform of the government-sponsored enterprises, referencing the Obama administration's two-year old white paper on the subject. Yet it does not move the ball forward in any way, instead saying that the "administration and Congress continue to evaluate long-term housing finance reform," a statement that appears at odds with policymakers' actual attention to this issue, which has been minimal to nonexistent.
Then-Treasury Secretary Tim Geithner pledged more details on a concrete GSE plan last spring, but the administration has yet to produce any.
SBA faces cuts thanks to a stronger economy
Obama's 2014 budget plan would cut spending at the Small Business Administration to $810 million, down $109 million from 2012 enacted levels, citing "the improving economic forecast and lower estimated loan defaults."
The proposal would also waive fees for loans of less than $150,000 in the agency's popular 7(a) business loan guarantee program, in order to "promote lending to small businesses that face the most constraints on credit access." The loan can be used to purchase land for construction, among other things.
