Corker’s Re­tire­ment May Change GSE Re­form Cal­cu­lus

Sen. Bob Corker’s de­par­ture at the end of next year puts a dead­line of sorts on his ef­forts to un­wind and re­place Fan­nie Mae and Fred­die Mac.

National Mortgage News - - Compliance & Regulation - By kate berry and rob black­well

sen. bob corker, r-tenn., a key voice in the de­bate over hous­ing fi­nance re­form and one of the Se­nate Bank­ing Com­mit­tee’s most in­flu­en­tial mem­bers, an­nounced last month that he will not seek re-elec­tion in 2018.

His de­par­ture puts a dead­line of sorts on his on­go­ing ef­forts to un­wind and re­place Fan­nie Mae and Fred­die Mac, an en­deavor he started in earnest four years ago but which so far has failed to gain trac­tion. Corker and Sen. Mark Warner, D-Va., have been the driv­ing force be­hind a bill to elim­i­nate the gov­ern­ment-spon­sored en­ter­prises and re­place them with pri­vate firms backed by a cat­a­strophic gov­ern­ment guar­an­tee.

It re­mains un­clear whether Corker can help make that vi­sion a re­al­ity in the re­main­ing 15 months he has left in of­fice.

“It puts a dead­line on ev­ery­thing he wants done,” said Karen Shaw Petrou, man­ag­ing part­ner at Fed­eral Fi­nan­cial An­a­lyt­ics, who called him one of the “most knowl­edge­able” pol­i­cy­mak­ers on the is­sue.

Jim Par­rott, a non­res­i­dent fel­low at the Ur­ban In­sti­tute and for­mer se­nior ad­viser at the Na­tional Eco­nomic Coun­cil in the Obama ad­min­is­tra­tion, noted that next year is also the last chance for House Fi­nan­cial Ser­vices Com­mit­tee Chair­man Jeb Hen­sar­ling to sig­nif­i­cantly shape GSE re­form, be­cause he faces a GOP term limit as the head of the panel.

“With next year Hen­sar­ling’s last as chair­man and Corker’s last in the Se­nate, we may ac­tu­ally see this get more of a push than any­one ex­pected,” Par­rott said.

Yet it’s not clear that there is enough sup­port to pass a bill on a topic as com­pli­cated and di­vi­sive as this.

“There sim­ply isn’t the path to pas­sage in this Congress,” said Isaac Boltan­sky, di­rec­tor of pol­icy re­search at Com­pass Point Re­search & Trad­ing.

Cam Fine, pres­i­dent of the In­de­pen­dent Com­mu­nity Bankers of Amer­ica, which has clashed with Corker over GSE re­form in the past, said that “align­ing all the com­pet­ing ap­proaches in light of the gen­eral paralysis that is grip­ping Congress will be a heavy lift.”

“Cer­tainly, if it doesn’t get done by late spring, then it prob­a­bly won’t get done be­fore the elec­tion,” Fine said. “And then with Corker gone, a key ad­vo­cate for his ap­proach to re­form will be gone.”

Still, Corker’s vi­sion may out­live his time in the Se­nate. Se­nate Bank­ing Com­mit­tee Chair­man Mike Crapo has sup­ported a ver­sion of the Corker-Warner bill in the past, and is widely ex­pected to push a sim­i­lar struc­ture when he un­veils a bill. Other al­lies like Warner will re­main in the Se­nate past 2018.

For his part, Warner lamented Corker’s de­par­ture, prais­ing him as a pol­i­cy­maker will­ing to work across the aisle.

“We have worked closely to­gether on a num­ber of bud­get and bank­ing-re­lated is­sues, par­tic­u­larly hous­ing fi­nance re­form,” Warner said in a press re­lease. “No mat­ter the chal­lenge, you can al­ways count on Sen­a­tor Corker to bring a rea­soned, thought­ful ap­proach, and to make de­ci­sions based not on par­ti­san­ship but on what he be­lieves is in the best in­ter­ests of the Amer­i­can peo­ple.”

In­deed, that may be the larger im­pact on Congress as a whole. Corker was a pol­icy wonk, will­ing to dive into the de­tails of an is­sue and not give in to knee-jerk par­ti­san re­ac­tions. He was a key player

in de­vel­op­ing parts of the Dodd-Frank Act of 2010, for ex­am­ple, even though he ul­ti­mately voted against it. Corker’s work helped in­form the Fed­eral De­posit In­sur­ance Corp.’s new pow­ers to take down and un­wind a fail­ing bank­ing com­pany.

More­over, GSE re­form is a tricky sub­ject that many law­mak­ers would just as soon avoid.

“Corker was the kind of guy who wanted to stay late at work and he was a mod­er­ate and an ally in work­ing with the Democrats,” said Chris Whalen, chair­man and founder of Whalen Global Ad­vi­sors, an ad­vi­sory firm fo­cused on banks and the mort­gage sec­tor.

If Corker leaves with­out fin­ish­ing GSE re­form, it’s un­clear if there will be an­other law­maker will­ing to take his place. Cer­tainly, other groups are li­able to make a push for their own vi­sion of GSE re­form.

For ex­am­ple, the Main Street GSE Re­form Coali­tion wants to end the GSE con­ser­va­tor­ship that be­gan in 2008 but en­act a min­i­mum amount of re­form. The coali­tion wants to cre­ate a cap­i­tal buf­fer for Fan­nie and Fred­die and en­sure equal ac­cess and pric­ing for small lenders.

Corker “has been very ac­tive on the is­sue but I’m not cer­tain as to what the im­pact will be on GSE re­form,” said Glen Corso, ex­ec­u­tive di­rec­tor of the Com­mu­nity Mort­gage Lenders of Amer­ica, part of the Main Street coali­tion.

Yet GSE re­form can­not be de­layed in­def­i­nitely. The GSEs are run­ning low on cap­i­tal and their reg­ula- tor, the Fed­eral Hous­ing Fi­nance Agency, will have to choose be­tween con­tin­u­ing to sweep the en­ter­prises’ prof­its into the Trea­sury De­part­ment or al­low­ing them to re­build cap­i­tal. If they run out of funds, it would force Fan­nie and Fred­die to bor­row from the Trea­sury.

“It’s only a mat­ter of time be­fore Fan­nie and Fred­die blow up, be­cause any in­sti­tu­tion as big as GSEs on zero cap­i­tal is on life sup­port,” Petrou said.

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