Here's how the typical story reports the problem with the GSEs (from Fortune):
They own or guarantee $5 trillion worth of mortgages - nearly half of all the country's outstanding home loan debt-and they're crashing. Big time.
Fannie Mae and Freddie Mac are struggling with an investor loss of confidence so great that, while they're unlikely to go under, they could conceivably see their ability to function impaired. That would wreak yet more havoc on an already wrecked housing market- making loans tougher to come by and possibly pushing hundreds of billions of dollars in cost onto U.S. taxpayers.
This whole situation is going to be a major campaign issue. Our Representative Scott Garrett is going to be able to claim he knew it was coming and fought to fix it, which he did. At the same time, Garrett is likely to get hammered for voting against reforming the GSEs twice, which he did.
Back in 2005, the Federal Housing Finance Reform Act was passed by the House. Garrett took to the floor a few times, but two are of note. Here's a soundbite from his floor debate speech:
Mr. Chairman, if there was ever a need of entities that need additional regulation, it is Fannie Mae and Freddie Mac. If there are ever two entities that need to be limited in their size, it is these two entities. If there were every two entities that need not grow, it is these two entities. I applaud the chairmen for their work to regulate them.
Despite his vocal support during floor debate, in an after hours speech laying out the nightmare scenario we're facing today, Garrett announced he would not support the reform bill:
I believe that stronger language is definitely necessary. I worry that a new regulator, without specific congressional direction to reduce the size of portfolios of the GSEs, will face constant political pressures from the GSEs, thus putting the possible problems that result on the backs of American taxpayers.
So in conclusion, Mr. Speaker, legislation that is coming before the House next week dealing with GSE, Fannie and Freddie reform is a good first step, but is not in the current format something that we should support.
True to his word, Garrett was one of only 90 to vote against the bill, which later died in the Republican controlled Senate.
Garrett's never lost the desire to limit the size of the GSE's portfolios. Most recently, Garrett was one of 104 to vote against first time home buyers in our District being able to get conforming loans through the GSEs as part of another GSE reform bill. This would have expanded the portfolio.
I was critical of his vote then, in terms of the benefits it could bring to our District, but the man's been consistent. He won't vote for reforms if they don't go as far as he thinks they should. Granted, as Dave Matthews sings, to change the world you start with one step.
It should be interesting to see how this plays out with the campaign. A lot is going to depend on how the situation is resolved outside of politics in the real world. Either way, Garrett will rightly be able to champion his reform stance, and Dennis Shulman will rightly be able to attack his votes against reform.
Ain't politics great...