The Senate Banking Committee today held a very collegial hearing at which senators on both sides of the aisle pushed for quick action on substantive changes to Fannie Mae and Freddie Mac, as well as near-term mark-up of bipartisan legislation to block use of guarantee fees for fiscal purposes and bar Treasury sale of senior preferred GSE shares. Sen. Corker (R-TN), a cosponsor of this bill, not only pushed for it, but also signaled GOP support for an FHFA nominee to replace Acting Director DeMarco if the person was sufficiently objective and technical, but made clear his firm opposition to the current front-runner, Rep. Watt (D-NC). Senators explored various reform ideas presented in a recent report by the Bipartisan Policy Center, which argued for a remaining government backstop behind deep layers of private credit-risk mitigation. Sen. Warren (D-MA) questioned the ability of the market to price for this risk, but Sen. Warner (D-VA) suggested selling some of it into the market to ensure appropriate pricing and provide an early warning of emerging market risk. Chairman Johnson (D-SD) signaled quick action on the limited GSE measure noted above, as well as on pending legislation from Sens. Menendez (D-NJ) and others to promote mortgage refinancings. This report summarizes other key aspects of the session that suggests Congress – or at least the Senate – may finally turn this year in earnest to GSE reform.

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