Congressional Republicans are moving aggressively to wind down mortgage giants Fannie Mae and Freddie Mac, but they face resistance not only from Democrats, but members of their own party who fear rapid elimination of the two entities would destabilize the fragile housing market. Sen. John McCain, R-Ariz., and House Republican Conference Chairman Jeb Hensarling, R-Texas, introduced identical bills in the House and Senate that would end the government conservatorship of Fannie and Freddie within five years.
The firms, known as government-sponsored enterprises, or GSEs, have cost taxpayers $150 billion since the government rescued them from near-collapse in during the housing crisis of 2008.
"The events of the last three years have made it clear that never again can we allow the taxpayer to be responsible for poorly managed financial entities who gamble away billions of dollars," McCain said, introducing the bill in the Senate last week.
In the House, the bill could come up for a vote in committee in May, House Financial Services Committee Chairman Spencer Bachus, R-Ala., said.
But some GOP lawmakers refuse to support the measure, in part because they are under pressure by the real estate industry, which wants to keep the GSEs operating in order to ensure there are low-interest loans for new and existing homes.
"I don't think they have the votes for it on the Republican side," said Rep. Barney Frank of Massachusetts, the top Democrat on the House Financial Services Committee.
The National Association of Realtors, one of the most influential groups lobbying Congress, is pushing Republicans to keep Fannie and Freddie operating under tighter regulations to prevent the kind of risk taking that led to the agencies' insolvency when the housing bubble burst three years ago. The real estate industry fears the end of GSEs would lead to higher interest rates and fewer loans, which could wreak havoc on an already struggling housing market.
"The principal problem facing the Republicans is they have a tremendous part of their own caucus who are very sympathetic to the real estate industry," said Mark Calabria, director of financial regulation studies at the Cato Institute, a libertarian think tank.
Rep. Gary Miller, R-Calif., a former real estate developer, said he will introduce legislation to reform Fannie and Freddie but keep them in business and that he expects "quite a few members" to support his plan.
"I think you have to have some form of GSEs in the market," Miller said.
On the Senate side, Sen. Richard Shelby of Alabama, the top Republican on the banking committee, said last week that housing-finance reform should not be rushed. Shelby refrained from co-sponsoring McCain's bill as he did last year when McCain introduced a similar measure.
House Republicans have also introduced a series of bills that would make only minor changes in the way Fannie and Freddie operate, such as raising the fees for guaranteeing mortgages and ending big pay packages for GSE executives. Those bills stand a much better chance of passing the House and even the Senate, where Democrats have the majority, they said.
