Fannie, Freddie Plan Underscores Need for Housing Stimulus Bill
The federal government’s plan to bolster investor confidence in Fannie Mae and Freddie Mac has added even greater impetus for Congress to complete action on a major housing stimulus package.
“We applaud the efforts of the Treasury and Federal Reserve to put an end to this reckless financial panic,” said NAHB President Sandy Dunn.
“While Fannie Mae and Freddie Mac remain fundamentally sound, recent market events underscore the need for Congress to act now to pass housing bill H.R. 3221,” Dunn said. “The legislation will help shore up home prices, strengthen the regulatory oversight of the housing government sponsored enterprises, stabilize the housing and financial markets and pay huge dividends for the entire economy.”
A July 13 statement by Treasury Secretary Henry Paulson, containing emergency legislative proposals, cited the central role that Fannie Mae and Freddie Mac play in the nation's housing finance system and emphasized that they would continue to operate in their current form as shareholder-owned entities. The new initiatives are far-reaching:
- As an additional liquidity backstop, the Administration asked Congress to temporarily increase the Treasury line of credit available to Fannie Mae and Freddie Mac, which currently is $2.25 billion for each company.
- On the equity side, to ensure that Fannie Mae and Freddie Mac have sufficient capital to continue to carry out their mission, the Administration plan seeks congressional approval for Treasury purchases of stock in the companies.
- Finally, the Administration asked Congress to modify the prospective regulatory framework to provide the Federal Reserve a consultative role in the process for setting capital requirements and other prudential GSE standards.
The Federal Reserve also took a step to provide short-term liquidity for Fannie Mae and Freddie Mac by providing them access to its discount window. This support is available immediately, but Fannie and Freddie have not announced any plans to borrow from the Fed.
Congress is expected to try to add the provisions requiring statutory authority to the GSE section of the Housing and Economic Recovery Act of 2008 (H.R. 3221). An alternative would be to package the provisions in a separate emergency bill.
House and Senate leaders have responded positively to the Administration’s announcement and are expected to move quickly to address these measures. While there is the potential for a delay due to the magnitude of the change contained in the GSE support provisions, the momentum currently favors rapid action.
For more information, e-mail David Ledford at NAHB, or call him at 800-368-5242 x8265.