Latest Bill Calls for Fannie, Freddie Merger
July 6, 2011
A bill is expected to be introduced today in the House of Representatives that calls for a merger between government-sponsored enterprises Fannie Mae and Freddie Mac, The Wall Street Journal reports.
Rep. Gary Miller, R-Calif., who is introducing the bill and who is also a real estate developer and former home builder, proposes that the newly merged firm also be restructured in how it operates. It would purchase mortgages and sell them to investors as securities that are backed by the government.
Unlike other bills that have called for winding down of the GSEs and privatizing them, Miller’s bill would not seek private owners for the new entity. However, the new firm would be privately capitalized.
“Banks would pay a ‘guarantee’ fee on loans that would fund the firm's operations and maintain adequate capital. Investors would pay an additional fee to finance an insurance fund that would cover catastrophic losses,” The Wall Street Journal explains.
The new firm would be regulated by the Federal Housing Finance Agency. The FHFA would ensure the firm’s market share never exceeds 50 percent of the mortgage market.
Lawmakers continue to wrestle over the fate of the GSEs, which have cost taxpayers $138 billion since the government took them over in 2008. Earlier this year, the White House called for winding them down. A series of bills currently in Congress are attempting to shrink Fannie and Freddie’s role and privatize them.
Miller’s bill is expected to garner bipartisan support.
Source:“Bill Calls for Fannie, Freddie Merger,” The Wall Street Journal (July 5, 2011) [Log-in required]
Updated: May 27, 2022