Fannie Mae and Freddie Mac have come to a critical chapter in their high-profile lives. While no one can deny that many homes have been financed with their help, the Republican-led House of Representatives associates the two with a billion-dollar taxpayer-funded bailout. Not a good legacy to have in a body that is going to shape the first steps at reform.
The language around some of the bills to reform the government-sponsored enterprises (GSEs) illustrates this point. Rep. Jeb Hensarling (R-Texas) is a senior member on the House Financial Services Committee. He first introduced his GSE reform legislation in 2008, then reintroduced it in March 2010, and it was later offered (unsuccessfully) as an amendment to the Dodd-Frank Act. On March 18, 2011, Hensarling reintroduced his legislation, calling it the GSE Bailout Elimination and Taxpayer Protection Act.
The anti-bailout fervor in the air in Washington, D.C., is captured well in this quote from a release about the legislation: "The two largest, most influence-exerting, regulation-avoiding, bailed-out institutions weren't banks and weren't located on Wall Street. They were Fannie Mae and Freddie Mac, the mortgage market financial Frankensteins that were created not in a competitive marketplace, but in a government lab in Washington."
And what Washington created, it now must return to...