“Any such disruption could trigger a ‘double-dip’ recession and such an occurrence will have a devastating impact on our country’s economy as well as the global finance system,” wrote B. Dan Berger, NAFCU’s executive vice president for government affairs.
The group’s letter came one day before the House Financial Services Committee’s subcommittee on capital markets and government-sponsored enterprises (GSEs) are scheduled to hold the first hearing of the session on reforming Fannie and Freddie.
There is general agreement that something needs to be done with the ailing GSEs, which have had to be propped up by over $100 billion in government funds since coming under federal conservatorship, with the end not yet in sight. However, a broad remaking of the nation’s housing finance system is expected by many to be a long, complex task.
However, House Republicans expected to play a key role in the effort have indicated recently that they want to push for action on the GSEs sooner rather than later, and that they have big plans for housing finance.
Rep. Scott Garrett (R-N.J.), who chairs the panel holding Wednesday’s hearing, said Monday that he thinks Fannie and Freddie should be winding down their portfolios faster, arguing it would help protect taxpayers from losses.
And both Garrett and Rep. Randy Neugebauer (R-Texas), who also sits on the Financial Services Committee, have indicated they want Fannie and Freddie to ultimately exist as wholly private entities, with the government playing a marginal role at best in the housing market.
However, the NAFCU said it does not support “full privatization” of the GSEs at this time, saying it had “serious concerns that small community-based financial institution could be shut-out from the secondary market.”
Rather, the government should maintain a substantial role in the housing system, offering an explicit guarantee on the payment of principal and interest on mortgage-backed securities, while retaining a system that has two GSEs of some form intact.
This post updated at 11:29 am.