‘Stealth’ GSE Reform: Two Major Changes in Shelby’s Reg Relief Bill
By Rob Blackwell
WASHINGTON — Since it was unveiled a week ago, most of the focus in Senate Banking Committee Chairman Richard Shelby’s draft of regulatory relief legislation has been on how it would ease the burden for small institutions and make changes to the Dodd-Frank Act. But lost in the discussion has been that the draft bill would also significantly revamp the housing finance system and make it easier for lawmakers eventually to wind down Fannie Mae and Freddie Mac. The bill would not eliminate the government-sponsored enterprises, but instead make several key alterations meant to reduce taxpayer risk posed by the federal conservatorship of the GSEs and enable private capital to play a bigger role in the mortgage market. It essentially borrows the elements from past legislative attempts at housing finance reform that drew consensus, leaving out the most controversial parts. The Shelby bill is “stealth bipartisan GSE reform,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics. “It’s masterful.” While Democrats have complained about other parts of the Shelby bill, there has been little to no mention of the measures on GSE reform. That is likely not an accident. The housing finance provisions appear crafted in a way to avoid drawing fire.