GSE Reform Off the Table Until After the Elections: Corker

WASHINGTON — Despite a major push to overhaul the housing finance market last Congress, Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., offered little optimism Tuesday that structural reform is likely anytime soon.

The bipartisan duo introduced legislation to unwind Fannie Mae and Freddie Mac last year as part of a broad plan to bring more private capital into the mortgage market in front of a catastrophic government backstop. The plan cleared the Senate Banking Committee but died before reaching the Senate floor last year — with momentum to restructure the market seemingly dying with it.

"It's going to be a while — it's not going to happen over the next year and four months," Corker told attendees at a Bipartisan Policy Center event on housing finance, noting that "Congress skates" on the tough issues on both sides of the aisle.

Still, the Tennessee Republican suggested that the mortgage market should keep its eye on yearend negotiations over the budget. The two senators, along with Sens. Elizabeth Warren, D-Mass., and David Vitter, R-La., are pushing a bill to "jump-start" reform by prohibiting the use of the government-sponsored enterprises' guarantee fees to offset unrelated spending. The legislation would also ban the Treasury Department from selling its shares in the housing giants without congressional approval.

Corker acknowledged that it's unlikely the measure will head to the Senate floor for a stand-alone vote in coming months, but he noted that the bill is part of a larger package by Sen. Richard Shelby, R-Ala., chairman of the Banking Committee, that may get some play. Shelby included the provision, along with several risk-sharing mandates for the GSEs, in his sweeping regulatory reform legislation, which is now attached to the Senate's financial services spending bill.

"The way you're likely to see this happen is with the appropriations riders," Corker said. "Now, will that survive and make it all the way to the floor that way? No. But will there be elements of it that do? Yes."

He added that the lawmakers' jump-start bill "certainly has a chance of making it as a part of that."

"Would I bet on it today? No. But do I think there's a reasonable chance and maybe even a probability? Yes," Corker said.

Warner, meanwhile, warned about the possible political fallout if the GSEs need another bailout while they're still in conservatorship. Under a deal struck with Treasury, Fannie and Freddie must ratchet their capital reserves down to zero by 2018, leaving them vulnerable in the case of a bad earnings report.

"I still have this fear that we could end up with a down quarter with the kind of broadness of the sweep — all hell [could] break loose if one of the entities had to go back to the government and say, We've got a shortfall on this quarterly basis and we need the taxpayer to ante up more money," Warner said. "I think there would be enormous outpouring.

"I can already write the TV ad," he later quipped.