GSE Reform: Immediate Steps to Protect Taxpayers and End the Bailout

Congresswoman Maxine Waters (D-Calif.), Ranking Member of the Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, delivered the following opening remarks during a hearing on "GSE Reform: Immediate Steps to Protect Taxpayers and End the Bailout" today:

"Thank you, Mr. Chairman, for organizing this first hearing of the Subcommittee on Capital Markets and Government Sponsored Enterprises during the 112th Congress.

"Today's hearing is an opportunity to address one of the most critical questions facing our economy:  how do we continue to move forward from the crisis and organize a secondary mortgage market that ensures access to sustainable homeownership, at affordable rates, for the American middle-class?  And how do we do this while protecting all taxpayers?

"For many years, we did a fairly good job of providing the opportunity for homeownership to the average American who worked hard and acted responsibly.  But over the course of the last decade, we saw the creation and evolution of toxic financial products that pulled Americans further and further away from the mortgages that we grew up with:  30-year, fixed-rate loans with sensible downpayments, for homes we could reasonably afford.

"Now, what caused these products to develop was the subject of many fights in this Committee during the last Congress.  I continue to believe that an unregulated, "shadow banking system" created the crisis, and that casino-style betting magnified and lengthened it. 

"Unfortunately, Fannie Mae and Freddie Mac, hungry for profits and market share, hopped on the bandwagon, albeit late.  The result has been enormously consequential for American taxpayers.

"Our objective, moving forward, should not be to continue arguing over the facts that led us to this point.  I sincerely want to begin the next phase – negotiating a plan for the future.

"I have not committed yet to any one proposal, and am open to any plan, coming from any Member, group or institution, that can advance the following goals:

• Can the plan preserve the 30-year, fixed-rate mortgage, whose availability I believe is vital for American borrowers?
• Does the plan provide for stability and liquidity, particularly in times of severe credit constriction, as we experienced over the last few years?
• Are there features in the plan that allow for access for all qualified borrowers, as well as the small and community banks that seek liquidity?
• Does the plan ensure that there is a secondary market for multi-family loans, and a market for individuals that seek affordable rental housing?
• Is there transparency for investors and regulators?
• Does the plan protect taxpayers, and ensure that a small number of institutions don't again become Too Big Too Fail?

"So these are the criteria by which I will evaluate proposals moving forward. 

"I understand that some details of the Administration's "option paper" were released to reporters last night.  I'm looking forward to reading the full report, and seeing the options they propose.  But what I'm more interested in hearing about are the principles the Administration thinks are important for GSE reform, such as whether they think the preservation of the 30-year, fixed-rate mortgage is essential.  While it's important that we get the technical details right as we develop a new housing finance system, I think it's even more important that we make clear what values underpin our vision for the future.

"So I look forward to working with the Administration, and my colleagues in Congress, on developing a plan that best meets the needs of all market participants.  I believe that all of us need to seriously consider every option on the table.

"Thank you, Mr. Chairman and I yield back the balance of my time."

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