[Congressional Record Volume 151, Number 144 (Thursday, November 3, 2005)]
[Extensions of Remarks]
[Pages E2254-E2255]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               FEDERAL HOUSING FINANCE REFORM ACT OF 2005

                                 ______
                                 

                               speech of

                          HON. JEB HENSARLING

                                of texas

                    in the house of representatives

                      Wednesday, October 26, 2005

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 1461) to 
     reform the regulation of certain housing-related Government-
     sponsored enterprises, and for other purposes:

  Mr. HENSARLING. Mr. Chairman, I first want to thank the gentleman 
from Ohio (Mr. Oxley) and the gentleman from Louisiana (Mr. Baker) for 
their leadership in getting this bill, H.R. 1461, to the House floor. 
Reforming the regulatory structure for the housing GSEs has clearly 
been a long time in the making.
  I am going to vote for this legislation, and I encourage my 
colleagues to do the same. I believe that we must act as a body to move 
this process forward, and work with the Senate to draft a bill that 
President Bush can sign into law. We are all aware of the economic 
damage that took place in the wake of other corporate accounting 
scandals, be it Enron, WorldCom or Tyco. It is important to remember 
that in terms of assets, Enron was only about one-sixteenth the size 
that Fannie Mae is today. WorldCom and Tyco were about one-tenth the 
size of Fannie in terms of assets. These facts cannot be ignored. 
Legislation is long overdue.
  However, I continue to have many concerns about certain provisions in 
H.R. 1461 that I believe could do more harm than good to our housing 
markets. Primarily, I am concerned that H.R. 1461 does not go far 
enough to protect our financial markets from the systemic risk posed by 
the giant portfolio holdings of Fannie Mae and Freddie Mac.
  Federal Reserve Chairman Alan Greenspan has warned us that without 
the needed restrictions on the size of Fannie and Freddie's portfolios, 
our ability to preserve safe and sound financial markets is 
significantly put at risk. H.R. 1461 would not give the new regulator 
the necessary tools to appropriately limit the size of the portfolios 
of these two institutions. The combined retained portfolios of these 
two

[[Page E2255]]

companies now exceed $1.6 trillion, up from $136 billion in 1990. 
Portfolios of this size do nothing to promote liquidity in the 
secondary market. Unfortunately, H.R. 1461 will do nothing to protect 
American taxpayers from having to bail these institutions out should 
they fail.
  I am also concerned about what is commonly referred to as ``mission 
creep'' of these two entities. Congress has given Fannie Mae and 
Freddie Mac very special charters, unique government-granted benefits 
that we do not grant their competitors. These benefits exist so that 
they can create liquidity in the secondary mortgage market and help 
create the American Dream for middle and low income families. In recent 
years, these entities have been clearly engaging in areas outside of 
this charter, including airplane leasing, purchasing tobacco bonds, and 
providing international consulting. H.R. 1461 does not provide the 
necessary bright line between the activities in which Fannie Mae and 
Freddie Mac can and cannot engage. While Congress prohibits Fannie and 
Freddie from originating loans, we clearly need a better definition of 
loan origination and what separates the primary market from the 
secondary market. Not only would a bright line provide clarity, it 
would enhance competition in the primary market and prevent these 
taxpayer-backed institutions from engaging in activities outside of the 
scope of their charters.

  Further, I have concerns about raising the conforming loan limits for 
Fannie Mae and Freddie Mac, as H.R. 1461 does. Raising these limits 
will do nothing to help Fannie and Freddie meet their affordable 
housing goals. The conforming loan limits were originally established 
to ensure that Fannie Mae and Freddie Mac are focused on increasing the 
availability of housing for middle and low income Americans. These 
limits are necessary to prevent Fannie and Freddie from competing with 
private sector lenders, who already meet the demand for larger home 
loans. Raising the conforming loan limits is a clear extension of 
Fannie and Freddie's charters. That is not the purpose of this 
legislation.
  Mr. Chairman, the Chairman of the Financial Services Committee worked 
diligently and in good faith with myself and many of my colleagues who 
had serious concerns about the creation of an affordable housing fund 
for both Fannie Mae and Freddie Mac in H.R. 1461. I applaud him for his 
willingness to include language in this bill that seeks to prevent 
affordable housing fund monies from being abused for political 
purposes. However, it is my hope that as this bill moves toward 
conference with the Senate, we take a serious look at the need to 
create another housing fund of this nature, especially one that has the 
potential to be abused for political purposes.
  Our housing finance system is driven by the creation of jobs, 
supported by sound economic policy. Under the policies of this 
administration and this Republican Congress, this system has never 
worked better, and we now have achieved the highest rate of 
homeownership in the entire history of the United States of America. 
Mr. Chairman, the truth is there is no greater housing program than the 
American free enterprise system.

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