Big Day?

Fannie Mae and Freddie Mac could enjoy a big day, later this week, when the House takes up legislation to create a new Government Sponsored Enterprises (GSE) regulatory structure, which also would oversee the Federal Home Loan Bank System.

The bill, shaped by House Financial Services Committee Chairman Barney Frank (D-Mass.), also features a new “Housing Fund,” to which Fannie Mae and Freddie Mac, annually, would contribute a percentage of their annual earnings to support new construction for very low income families. It is estimated that this fund could produce from $350 million to $500 million, every year.

There is little doubt that the Chairman’s bill will pass.

Most attention, “inside the Beltway” and among the GSE cognoscenti, however, is focused on a bi-partisan floor amendment, which will be offered by committee members Reps. Melissa Bean (D-Ill.) and Rep. Randy Neugebauer (R-Tex.).

Bean-Neugebauer, essentially, would give the new GSE regulator interdiction authority, similar to that of other federal financial regulators. The regulator would be required to focus on safety and soundness issues which could impact the companies, not the more amorphous language, currently in the Committee bill, which would allow the regulator to act against the companies because of problems elsewhere in the financial services system, if the regulator somehow believes that there is a nexus.

It’s been reported that Chairman Frank will vote against the amendment, but doesn’t oppose the new language. That is what smart Chairmen do, when faced with a reasonable amendment, but one which challenges a legislative package--based on a series of mutual compromises--which he crafted with the Administration.

White House spokespeople already have threatened to withdraw Administration support for the bill, if the Bean-Neugebauer amendment succeeds. Most people realize the difference between that statement and a threat to veto.

But, Bean and Neugebauer supposedly have struck a responsive cord, among House members, who seem to feel that the two have a viable solution to a real problem. That view is shared by enough Democrats and Republicans to see the pair successfully move their amendment on the House floor.

From the companies’ perspective and those of their allies, on the Hill and off, the proposed new language makes less onerous some of the provisions, which the Administration, in their anti-Fannie/Freddie zeal, insisted on having in the House bill.

On many policy issues, recently, including: Iraq, the firing of the US Attorneys, immigration, and others, the White House can’t seem to find supportive votes from the GOP rank and file. The Bean-Neugebauer amendment just might be the next one, where the Admin faces a setback.

If that provision passes and the bill gets sent to the Senate, the Bush Administration could face an even tougher crowd, i.e. Senators unwilling to buy into further hamstringing of the GSEs.

By being so politically greedy and insisting on multiple legislative limitations on the GSEs, presumably to help the secondary mortgage market become large commercial bank dominated, the “Bushies” might well over play their hand and wind up with no legislation.

While Treasury Secretary Paulsen has shown willingness to compromise on some matters, the Administration’s anti-GSE “hard core,” and the GOP’s big financial services contributors, haven’t shown much flexibility.

Even if a House vote on Bean-Neugebauer comes up short, the notoriously independent (of the White House) Senate Banking Committee and it’s new Chairman, Sen. Chris Dodd (D-Conn.), could still adopt it or something similar, when the Committee staff gets around to crafting their “Chairman’s mark.”

Passage of the Frank legislation, with Bean-Neugebauer language, or even with a close, but unsuccessful vote, on Bean-Neugebauer, also will represent another major setback for the anti-Fannie/Freddie crowd, their tag along trade association friends and the conservative think tanks and interests, which succor them.

If that happens, I guess we’ll see if it’s true what they say about “payback!”