Over at the excellent Atlantic Business Channel, Daniel Indiviglio runs through the three major overlooked issues in Sen. Chris Dodd’s (D-Conn.) financial
Over at the excellent Atlantic Business Channel, Daniel Indiviglio runs through the three major overlooked issues in Sen. Chris Dodd’s (D-Conn.) financial regulatory reform bill that economists and market-watchers flagged for The New York Times. The folks quoted cite credit runs in the shadow-banking sector (in English: old-fashioned bank runs in the new-fangled trillion-dollar “repo” market, where financial firms provide short-term loans to one another) and firm capital and reserve requirements as “huge problems.” I agree there — but not with the third issue: the absence of policies to deal with Fannie Mae and Freddie Mac.
One big problem: the government-sponsored mortgage entities, which essentially everyone agrees paid a major role in the financial crisis. They have been the recipient of a still growing $200 billion bailout.
One [New York Times] source agrees: “Lawrence J. White, a finance professor at New York University, said it made no sense to overhaul financial regulation without addressing the future of federal housing policy. He said he was trying to find the strongest possible words to describe the omission of Fannie Mae and Freddie Mac from the legislation. ‘It’s outrageous,’ he finally said.”
This is also a Republican complaint. Fannie and Freddie played a huge role in helping to overheat the U.S. mortgage market. Until those agencies experience some fundamental change in policy and procedures, it’s hard to see how another housing disaster won’t occur again in the future. There’s no attempt at any reform for these companies in either of Congress’ financial regulation proposals.
But I’d push back hard on the notion that the bill “ignores” Fannie and Freddie, the government-sponsored enterprises now backing 90 percent of mortgages. The bill chooses not to handle them, for a number of reasons.
One, the financial regulatory reform bill focuses on re-regulating Wall Street, not changing Washington — on bolstering oversight and regulation of private businesses to ensure that they do not endanger the economy, rather than altering the government’s complicated relationship with housing finance.
A second and related point: The Fannie and Freddie bill might not be as big as financial regulatory reform. But it will be a big and complicated bill. Why roll all of the politicking over the trillion-dollar question of whether to shut Fannie and Freddie down — or whether the government should be in the business of subsidizing mortgages and backstopping the U.S. housing market at all — in with the question of, say, whether Goldman should keep more cash on hand? Why hold up the Dodd bill while Washington figures out how it wants to handle mortgage finance? Why let two potentially controversial bills hurt one another’s chances? Moreover, why group what might be an expensive housing bill in with the slightly deficit-reducing financial regulatory reform bill?
A third point: Washington was ready for the Dodd bill 18 months after the financial crisis. Consensus — whether good or not — had formed around the Dodd proposals. Washington is decidedly not ready for the housing bill — there are no proposals yet, and many on the Hill do not even know the parameters of what Congress might hope to accomplish. (Republicans should stop complaining about this. Their financial regulatory proposal hardly offered a disquisition on Fannie and Freddie. More like a sneeze.)
Finally, the Obama administration has buoyed the housing market this year, engaging in policies to keep fewer people underwater and to soften housing losses for banks. The Fannie and Freddie bill will likely change the housing market, for better or worse — the administration would not want to tackle how to do that now.
Rep. Paul Ryan to deliver SOTU response
Chairman of the House Budget Committee Rep. Paul Ryan (R-Wis.) will deliver the Republican response to the State of the Union Tuesday, according to Mike Allen
Rep. Paulsen allies with medical device industry to relax FDA oversight
Source: Flickr; Republicanconference (www.flickr.com/photos/republicanconference) On the heels of the Minnesota Independent story last week about U.S. Rep. Erik Paulsen’s cozy financial relationship with the medical device industry, the New York Times reported Tuesday that some health professionals are alarmed by Paulsen’s push to relax Food and Drug Administration (FDA) oversight
Rep. Paulsen touts balanced budget constitutional amendment
In a post for the conservative blog True North , U.S. Rep
Rep. Patrick McHenry: Please, Conservatives, Fill Out Your Census Forms!
The conservative congressman from North Carolina, a constant critic of the census -- one of the people who sounded the alarm about politicization when the
Rep. Paulsen, Karl Rove the latest to get ‘glittered’
Rep. Erik Paulsen and former Bush staffer Karl Rove were both showered with glitter at the Midwest Leadership Conference Friday
Rep. Perlmutter to hold constituent meet-up in grocery store
Colorado Congressman Ed Perlmutter will hold a Government in the Grocery constituent meet-up this evening from 5-7 at the Safeway at 38th and Wadsworth in Wheat Ridge. The address is 3900 Wadsworth. The meeting, where Perlmutter typically sits at a folding table and talks to whomever shows up, is free and open to the public
Rep. Perlmutter criticizes House measure that would eliminate 800K federal jobs
Congressman Ed Perlmutter today issued a scathing statement criticizing the House of Representatives for passing a spending bill that could put nearly a million federal employees out of work. The Colorado delegation voted strictly on party lines, with all four Republicans voting in favor of the bill and the three Democrats voting in opposition. Perlmutter’s statement: “My number one priority is to get people back to work because that’s the best thing we can do to pay our debt and move forward toward economic stability
Rep. Pete Stark Won’t Dignify Constituent by, er, Micturating Upon His Leg
In the tradition of Rep. Barney Frank (D-Mass.), California Democratic Rep. Pete Stark revealed at a recent town hall gathering that there are limits to what
Rep. Peace, ACLU seek investigation of soldier’s allegations of racial discrimination in Afghanistan
Both Rep. Steve Pearce (R-NM) and the American Civil Liberties Union agree: There needs to be an investigation into Spc.
School of Hock
A growing number of college grads are defaulting on their student loans as the economy worsens.