Political doldrums and Fannie Mae
This year the doldrums had moved farther north than usual, and the ship of state was in them, well in …. Day after day she lay there with her head all round the compass, inanimate, her committees handing limp, sometimes rolling so that most bloggers were sick all over again, rolling so heavy … and all day long the heat beat down from a veiled sun.
– Patrick O’Brian,
“A town with northern charm and southern efficiency,” as John F. Kennedy accurately cracked, it is particularly drowsy during the dog days, and until the air conditioner liberated tailoring, it was the last refuge of the seersucker suit.
An Englishman playing a Southerner opposing a Presidential nominee …
Even with air conditioning,
Such a windless calm has fallen over GSE reform, as
the more ’stately’ (meaning slow) Senate bestirs itself to examine the limp moist engrossments of proposed legislation to reform and more tightly regulate the GSEs:
A congressional vote on new regulations governing Fannie Mae and Freddie Mac has been delayed until at least mid-September after House officials agreed last week to let a second committee review the proposed legislation.
Rep. F. James Sensenbrenner Jr. (R-Wis.), chairman of the Judiciary Committee, said on Thursday that the panel would take a look at the parts of the bill that fall under its jurisdiction, such as those related to criminal penalties and placing the companies in receivership if they run into financial trouble, said Sensenbrenner spokesman Jeff Lundgren.
If the ship of state permanently becalmed?
Though several analysts and others with an interest in the bill characterized that review as routine, some argued that any delay in such a complicated and increasingly contentious piece of legislation could dim its chances.
“I think this raises serious concerns about whether anything will be done this year,” said Bert Ely, a financial services consultant and longtime critic of Fannie Mae.
“I, William Bligh, have the qualifications to regulate the unruly ….”
The Senatorial ships of the line always move with a heavier wallow and roll than their lightweight frigate counterparts in the House:
The House Financial Services Committee approved a version of the bill in May, when a speedy trip to the House floor and similarly quick progress through the Senate were expected.
USS Constitution, still undefeated and still afloat
Despite the delay in the House, Richard C. Shelby (R-Ala.), chairman of the Senate Banking Committee, hopes to have a draft of the legislation next week, according to Virginia Davis, a spokeswoman for the panel.
Introducing a draft into late July is like hoisting the sails in a dead calm: it shows industry but will not make the ship of state move any faster. For that one needs political winds. And meanwhile, below the waterline, the ship is picking up a lengthy beard of Sargasso-Sea weed:
The review by the House Judiciary Committee comes as conservative lawmakers continue trying to build opposition around a provision requiring the two giant mortgage companies to set aside a portion of their profits for low-income housing.
The legislation’s main provisions focus on creating an independent regulator for Fannie and Freddie following accounting problems at the two companies. The low-income housing proposal was added to gain support from Democrats but has emerged as the chief target of conservative opponents.
“We represent the national association of national associations ….”
Rep. Barney Frank (D-Mass.), ranking minority member of the Financial Services Committee, said he fears the Judiciary Committee’s review will only help opponents derail the bill. “My concern is [the delay] will be used for inappropriate purposes” such as lobbying House leaders to kill the bill, he said.
Critics of the proposed set-aside also think a delay works to their advantage. “The longer time goes on, the more concern will arise, and the more likely we will be able to resolve the issue by not having funding for advocacy groups,” said Rep. Tom Feeney (R-Fla.).
Funding for advocacy groups? Gee, I thought it was funding for housing ….
Other observers played down the impact of the Judiciary Committee’s review.
“I don’t see this wrinkle as any stumbling block. The bill has plenty of real problems to overcome,” said Kurt Pfotenhauer, a lobbyist for the Mortgage Bankers Association.
There is thus the emerging risk that, as between the right that wants to clip the GSEs much further but not burden them with affordable housing mission (golly, what do you expect for $7 billion a year in implicit subsidy?), and a left that wants to force them to monetize their mission sentiments into a capitalized fund, the end result may be nothing whatsoever:
Those other problems include opposition from the Bush administration, which contends that the House version does not go far enough to reduce the size of the two companies, whose scope and ability to borrow at government-subsidized rates have raised concerns.
Meanwhile, there are some who would be happy to let the lazy, hazy, crazy days of summer roll by one by one:
“From my standpoint, there isn’t an urgency,” said Al Mansell, president of the National Association of Realtors. “Nothing’s happened at Fannie and Freddie that will change by legislation.”
Balance sheet restrictions, Mr. Mansell? False signatures?
“They’ve already taken their medicine. People are pleased with the way they’ve responded to the problems. There’s no dramatic need to do this in a hurry.”
In this Mr. Mansell is, of course, quite wrong. Contrition is free, and non-binding. The balance sheet expansion, stock market exposure, and Federal systemic risk are still present.
Still, even the doldrums finally end. Just as a ship sailing south eventually picks up the trade winds, with the Labor Day weekend, members return to Washington, temperatures drop, and the legislative pace picks up, becoming an ever-more-brisk trot, then sprint, then stampede to finish essential legislation, fund the next year’s budget before the fiscal year expires on September 30, punt on inessential legislation, and in general create enough political successes so the members can return to their districts with achievements for which to take credit.
Like every other blogger he had heard of ships of state in the political doldrums lying helpless for weeks and even months, eating their staffs and accumulating weed: he had had severe experience of it himself; … and it appeared to him that the ship of state was in for a very ugly bout.
– Page 147
