President Obama’s nominee for Housing secretary on Tuesday told the Senate Banking Committee he is open to shuttering the mortgage giants Fannie Mae and Freddie Mac.
{mosads}Senators expressed little opposition to San Antonio Mayor Julián Castro’s nomination for secretary for Housing and Urban Development (HUD), a job that would give him a major role in the push for reforms to the housing system.
Though he declined to endorse any specific legislative proposals, Castro said he supports ending the federal backstop that Fannie and Freddie now enjoy.
“I absolutely believe that there are better alternatives than what we have in place with this duopoly and with the conservatorship,” Castro said.
That was enough for Sen. Bob Corker (Tenn.), who said he will support Castro’s nomination.
“You will be involved in what happens with Freddie and Fannie,” Corker told Castro at the hearing. “You were a little vague on your support of the bill, and you should be at this point, but relative to [Fannie and Freddie status quo] you agree with that 100 percent.”
Corker and Sen. Mark Warner (D-Va.) put forward a housing finance proposal that became the foundation for a bipartisan bill from Banking Committee Chairman Tim Johnson (D-S.D.) and Sen. Mike Crapo (Idaho), the committee’s ranking Republican.
“I believe that reform would be preferable to what we have in place now,” Castro said in response to a question from Sen. Jon Tester (D-Mont.). “If the nation were to experience another downturn and another housing crisis as we just experienced, for that reason I commend the committee for working toward a housing finance model that takes the taxpayers out of their position of first loss and puts the private sector in that position.”
The committee approved the Johnson-Crapo bill last month on a 13-9 vote, with liberal Sens. Charles Schumer (D-N.Y.), Sherrod Brown (D-Ohio), Jeff Merkley (D-Ore.) and Elizabeth Warren (D-Mass.) opposing it because of concerns the legislation did not do enough to address affordable housing. The lack of liberal support likely killed the bill’s chances of receiving a floor vote this year.
“I fully understand though, as well, the concerns of folks with regards to the other part of the balance, which is access to credit,” Castro continued in his response to Tester. “We have had a housing finance system in place that seeks to ensure opportunity for Americans with modest means who are credit borrowers.”
Housing finance reform has been one of the largest financial regulatory issues left unresolved from the 2008 economic crisis. The government took control of Fannie and Freddie in September 2008 and gave them a $187.4 billion taxpayer bailout.
Now, eight years after the crisis, the government is still conservator. Further complicating the issue is that Fannie and Freddie have become profitable again and have paid back the bailout money.
Johnson asked Castro about a 2012 HUD inspector general report that found San Antonio had mishandled $8.6 million in HUD allocations to the city. Castro said the city returned $125,000 of that money, and that he had personnel removed who were involved with the decision.
Castro, a rising Democratic star who is often named as a potential vice presidential 2016 contender, had a packed crowd of about 50 people inside the Dirksen Senate Building, which is unusual for a Banking Committee confirmation hearing.
He was introduced by Sen. John Cornyn (R-Texas).
Castro was joined by his family, including his twin brother, Rep. Joaquín Castro (R-Texas), who arrived late the hearing.
“You’ll have to forgive him. He’s the second-born twin and sometimes he’s late,” the mayor quipped of his brother’s tardiness.
President Obama nominated Castro for HUD secretary because the current chief, Shaun Donovan, has been nominated to lead the Office of Management and Budget.