Why GSE Reform Is Still a Priority
By Karen Shaw Petrou
The Senate Banking Committee has now scheduled its markup vote of bipartisan legistlation to reform the government-sponsored enterprises, a bill sponsored by chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, for April 29. Conventional wisdom has it that the bill won’t go anywhere in part because, now that the GSEs are “profitable,” there’s no need to do anything anytime soon. However, a close look at the GSEs shows that, despite a lot of progress in bringing them back from the brink, they are anything but profitable. Nor are they in any condition to withstand future stress without another taxpayer bailout. Thus, GSE reform is an urgent congressional priority. Advocates of GSE “profitability” cite the billions the GSEs have sent back to Uncle Sam, billions that will shortly nominally equal the $188 billion taxpayers shoveled their way during the crisis. Some have argued this purported profitability shows how well the GSEs are doing, and, moreover, that they have done their time and now can be handed back to private shareholders, obviating the need for statutory reform.