The recent bill discussed by the senate to wind down Fannie Mae and Freddie Mac, the two government-backed lending giants, was opposed by six democrats, who said they won't change their stance if major alterations aren't made to the bill.
The six senators : Charles Schumer of New York; Elizabeth Warren of Massachusetts; Sherrod Brown of Ohio ; Jeff Merkley of Oregon, Robert Menendez of New Jersey and Jack Reed of Rhode Island claim that the structure of the proposed bill didn't support affordable housing goals and was unworkable.
"The affordable housing standards issue and the duty to serve I think are important. I don't think they're addressed in the way they should be. I think there is increasing sentiment I hear from people from all over the financial services sector, from Wall Street to community banks to credit unions, that say, ‘How is this going to work?'," Sherrod Brown, one of the opposing democrats told Bloomberg earlier.
The disagreement is not only delaying the elimination process but is also cutting the possibility of winding it down. Many believe that the plan will never reach a senate floor vote and that Fannie and Freddie will continue operating like before.
However, the senate committee said that although they have enough votes to pass the bill, they want to gather more support to strengthen the legislation.
"We're going to have a little more conversation. We've narrowed it down to a very small group of points that potentially could bring a lot more members on," Sen. Bob Corker, one of the members who pitched the bill's early versions, told reporters last Tuesday.
The in-doubt senators are rooting for changes like stronger lending insurance in poorer communities and increased liability limits of banks on mortgage securitization.
During the 2007-08 housing market crash, the lending firms were bogged down by humongous debts and rescued by the government via financial aid. Fannie and Freddie have now returned to profitability since the market's slow but steady recovery. However, the damage that the bust caused drove lawmakers to find alternatives to insure against an economic disaster.
Fannie and Freddie are now paying back the $170 million aid they received in installments. Recently, the firms revealed that they would pay $10.2 billion in bailout dividends to the U.S. Treasury department.
"We expect our annual earnings to remain strong over the next few years but substantially lower than we experienced in 2013, Earnings may vary significantly from quarter to quarter and year to year due to a number of different factors such as changes in home prices or changes in interest rates," Timothy Mayopoulos, Fannie Mae's chief executive officer told Reuters.
