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Legislative Hearing on Immediate Steps to Protect Taxpayers from the Ongoing Bailout of Fannie Mae and Freddie Mac

March 31, 2011
Committee Remark

Thank you, Mr. Chairman, for organizing this hearing.

This is now our third hearing on GSE reform during the 112th Congress.  As I have stated at those previous hearings, I am committed to working with my colleagues on a practical, comprehensive reform proposal to reshape our housing finance system. 

That comprehensive proposal will inevitably need to include shorter-term provisions to address how we transition from where we are to where we want to be.  Those measures must both encourage the return of private capital to the market, while also ensuring that we do not disrupt our housing finance system and shake our nascent economic recovery.

I think it is important to note that some shorter-term steps are already being addressed as the GSEs are in conservatorship.  For example, the Federal Housing Finance Agency (FHFA) has raised guarantee fees, making GSE mortgages more expensive for borrowers and more accurately pricing risk.  FHFA has also prohibited the GSEs from launching new product lines.  The office of the FHFA inspector general has been established, and the portfolios of Fannie Mae and Freddie Mac are being wound down.

Many of the proposals we will consider today are, to a certain degree, restatements of what is already occurring, and I am willing to work with my colleagues on some reasonable refinements of current practices.  Some other aspects of the proposal accelerate what is already being done, or include more prescriptive direction to regulators for how they should manage the conservatorship.

I think these are important debates for us to have, but we must consider that if we move too precipitously, we run the risk of destabilizing our economy.  Three million more foreclosures are expected in the next year, and home prices are three percent lower than they were last year.  Like many observers, I believe that the housing crisis is far from over.

I am also eager for the Committee to consider whether adopting these shorter-term measures without considering comprehensive reform is the best strategy.  I think that most stakeholders would like to know what is coming next before we start accelerating the wind-down of what we have now.

We must also ensure that our regulators have the flexibility they need to respond to our still volatile housing market conditions, and that their hands are not tied by legislation that is too rigid.

Again, thank you Mr. Chairman for holding this hearing.  I look forward to learning more about these proposals and yield back the balance of my time.