[Congressional Record (Bound Edition), Volume 153 (2007), Part 9]
[House]
[Pages 13183-13195]
[From the U.S. Government Publishing Office, www.gpo.gov]




                         PARLIAMENTARY INQUIRY

  Mr. FRANK of Massachusetts. Mr. Chairman, parliamentary inquiry.
  The CHAIRMAN. The gentleman will state his parliamentary inquiry.
  Mr. FRANK of Massachusetts. Do we not go back and forth between the 
parties in recognition?
  The CHAIRMAN. The Chair accords priority to members of the committee.
  Mr. FRANK of Massachusetts. Without regard to party? The gentleman 
from Colorado is a member of the committee.
  The CHAIRMAN. The Chairman did not see the gentleman from Colorado 
standing at the time he recognized the gentlewoman from Illinois.
  The Chair will go to the gentlewoman from Illinois, and that will be 
followed by the gentleman from Colorado. So there is an understanding, 
the Chair intends to recognize members of the committee first in the 
order in which they are standing, regardless of which side of the aisle 
they may come from.
  Mrs. BIGGERT. Mr. Chairman, I move to strike the requisite number of 
words.
  Mr. Chairman, I rise to support the amendment to strike the 
Affordable Housing Fund.
  I think the reason that we are having so much trouble talking about 
this, I know that in our March 15 hearing we urged the chairman if we 
could spend some time working this out prior to coming to the floor, 
and obviously that hasn't happened. But I think, because of all the 
questions, because we haven't had a hearing on this and we don't know 
what the national fund is; and he keeps saying we have got an 
Affordable Housing Fund now.
  It is estimated by CBO that it is going to be $3 billion over a 5-
year period. If that is 1.2 basis points, then it will be the $3 
billion. But there is still no dollar limit as to how large the fund 
can become. Where will the money for the fund ultimately come from? We 
don't know, talking about is it going to be from lower and middle 
Americans, or is it going to be from shareholders?
  But I think these are all things that need to be considered before we 
have the fund. And I know it is, ``Trust me. We are going to have a 
national fund and we will figure out how it is going to work.'' But I 
think that, in this day and age, that we really need to give the 
regulator some idea of what their job is.
  I agree with so much of this bill. I think it is a shame. I voted for 
the bill last time, and I was very proud to do that. A lot of people 
didn't vote for the bill. And suddenly, most of the bill that was in 
that bill is now in this bill.
  But unlike last year's legislation, I think this bill has included in 
this provision that doesn't permit the regulator to focus on the very 
important duties in this bill, and rather to have this Affordable 
Housing Trust Fund I think it is too bad. The new regulator has the 
duty to write those regulations and then administer an Affordable 
Housing Grant Fund program from day one, when we don't know what this 
national trust fund is going to end up being. I don't think that this 
is an appropriate time to do it.
  So I urge that we would strike the Affordable Housing Trust Fund from 
this bill, and would urge support of that amendment.
  Mr. PERLMUTTER. Mr. Chairman, I move to strike the last word, and I 
yield to Mr. Frank from Massachusetts.
  Mr. FRANK of Massachusetts. I unfortunately have to again correct the 
ranking member. There was no money for affordable housing construction 
of any significance for Katrina affected areas.
  The gentleman from Alabama incorrectly stated that we already voted 
$3 billion for Katrina. In the bill that we passed for the hurricane, 
there was one proposal for project-based section 8 that could help 
build 4,500 units. There was no other money in that bill for housing 
construction. Members will go back and read the debate, and they will 
see it was always contemplated by those of us for the bill that would 
be accompanied by this bill.
  The assertion that this duplicates money voted for housing 
construction in Katrina has zero accuracy. This was always contemplated 
to be the second bill.
  Additionally, the gentleman said I said the money wouldn't come from 
anywhere. No, quite to the contrary. I said several times in this 
hearing that it would come from the shareholders. I do not believe that 
Fannie and Freddie have monopoly pricing power that allows them simply 
to pass along every cost. Beyond that, I did note know that there were 
other positions being taken that would reduce the portfolio of Fannie 
and Freddie that would have far more impact on the profitability than 
the housing fund.
  So those who believe that when you impact Fannie and Freddie's 
profitability you raise the cost of mortgages, they should not be for 
any other reductions in the housing fund.
  I thank the gentleman from Colorado and I return his time to him.
  Mr. PERLMUTTER. I would like to say something to the gentlelady from 
Illinois. The Affordable Housing Fund has specific and definite 
parameters as to how it is derived and how it is built. So I am not 
sure what she is saying is there is no certainty attached to it.
  And the other thing is this is a classic tail wagging the dog 
argument. My friends on the other side, here we have, as Mr. Bachus 
aptly pointed out, an entity. And it is a government entity, these GSEs 
with trillions of dollars of assets. And what we are talking about here 
is $500 million of affordable housing passing from one government 
entity to potentially another. It is less than one one-thousandth of 
the overall asset base of the particular GSEs, and less than 10 or 13 
percent of the several billion dollars misstatement in accounting, 
which is what we are really trying to get to in this bill.
  These entities could not account for their funds properly. They need 
more oversight. And I find my friends on the other side disregarding 
the purpose of this bill, which is the oversight to rail against the 
affordable housing for people in low and very low income situations 
from profits that are generated by a government entity.
  They are saying that is wrong, that is socialism.
  Mr. BACHUS. Mr. Chairman, will the gentleman yield?
  Mr. PERLMUTTER. I yield to the gentleman from Alabama.
  Mr. BACHUS. The gentleman keeps saying this is a government entity. 
This actually is a government-sponsored entity. And what we do in this 
bill is we try to separate and say that there is no implied guarantee 
by the government for this entity; it needs to generate its own 
profits. And it does that from homeowners whose mortgages they purchase 
or back.
  Mr. PERLMUTTER. Reclaiming my time. Government-sponsored entity, 
government entity. In this instance, this is minute compared to the 
assets of this government-sponsored entity, and this is a classic tail 
wagging the dog. I would urge a ``no'' vote on this amendment.
  Mr. GARRETT of New Jersey. Mr. Chairman, I move to strike the last 
word.
  First of all, let me commend the chairman on his work on this 
legislation with regard to the underlying and the basic principle where 
this whole legislation came from; and that is, to create a world class 
regulator, I think was the buzz word when we first started working on 
this, with regard to the GSEs. And when the night is done and we vote 
on final passage of this, I hope that the language in the bill, I see 
the chairman is leaving. But I hope that the chairman will stick to his 
promise and the assertions that what we have in this is a good 
regulator, and it will not have any amendments that will water that 
down.
  But to the point of the ranking member's amendment, I stand in 
support of

[[Page 13184]]

the amendment. We should look at this and realize that what we have in 
this housing fund is an MTI, a mortgage tax increase. After this bill 
becomes law and a prospective homeowner goes to buy his next house and 
he sits there at the lawyer's office with the stack of papers this high 
that they have to fill out, somewhere in those documents buried in all 
the fine print and other costs that always are found in a home purchase 
at the last minute will be increased costs to them, an MTI, a mortgage 
tax increase.
  Why is that? Because, as the ranking member indicates, you can't pull 
money out of thin air. We are not creating perpetual motion by this 
bill. They are trying to set with the housing fund a new flow of money 
to go into this. But where does it come from?
  Now, the chairman of the committee constantly retorts that it is not 
coming from the perspective home buyer, it is not coming from the low 
and moderate income individual, who is just getting enough money 
together to buy that first house. And yet the door is slammed shut on 
them because one more tax, an MTI, a mortgage tax increase, is coming 
through this bill.
  The chairman would suggest that it is coming exclusively from the 
stockholders. I don't see the chairman on floor at this time, but I 
would offer and entertain from the chairman whether he would accept an 
amendment to the bill right now that would specifically say that: That 
no increase in fees can be charged; that we cannot raise any taxes on 
the individual; and that all the money has to come from the 
stockholders.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
  Mr. GARRETT of New Jersey. I yield to the gentleman from 
Massachusetts.
  Mr. FRANK of Massachusetts. I wouldn't accept such an amendment 
because it would be impossible to enforce the economics of what's 
involved, to the extent that an entity has pricing power, monopoly 
pricing power or duopoly that can pass along the costs.
  I would just note that the gentleman from New Jersey has an amendment 
that would have a far more significant negative impact on the 
profitability of these institutions than this bill.
  Mr. GARRETT of New Jersey. Reclaiming my time. Because I have heard 
the gentleman make that charge with regard to my amendment, which has 
not come to the floor yet and I will be glad to get into a debate on my 
amendment later on. But the amendment that is before us right now 
addresses the issue as far as this MTI, mortgage tax increase.
  And I appreciate the chairman now coming to the floor and saying 
specifically that his comments earlier was not absolutely correct when 
he said it would all come from the stockholders. Before he said it 
would come from the stockholders and not from the home buyers. Now he 
just indicated that you can't put that in language because you cannot 
actually prove that is going to occur. And that is my point, that at 
the end of the day the GSEs are in control of this. They will have the 
tax on them; they will have to decide where this tax is going to be 
placed. Is it on the poor, low income family, who has no bargaining 
rights with the GSEs at all; or will be with their stockholders, which 
the chairman just admitted that we as a legislative body cannot 
control.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
  Mr. GARRETT of New Jersey. I yield to the gentleman from 
Massachusetts.
  Mr. FRANK of Massachusetts. I am disappointed in the gentleman's 
naive economics. No, you cannot by statute affect this economic 
question.
  My point is that is a measure of where the pricing power is, and it 
is impossible to sort out where it comes from when you are talking 
about profits. A corporation will maximize profit. One of the 
restraints on that will be competition.
  My belief is that there is sufficient competition in this field so 
their ability to put all the costs on the customers and not have much 
on the company shareholders is far less than the gentleman from New 
Jersey thinks. That is not something you do by statute, as in every 
other context he would recognize.
  Mr. GARRETT of New Jersey. And I am not naive in my politics or on 
economics at all. Because we know that, in business, at the end of the 
day the cost of anything that we buy is eventually paid for by whom? By 
the consumer.
  You can say that you are pushing it off onto the stockholders or the 
investors of the company, but at that point in time you realize that if 
it raises the price too much for the stockholders or investors to 
invest in that company, what will they do? They will step back and they 
will not invest in that entity anymore, they will not invest in that 
company anymore, which raises the overall cost for investment for that 
entity. In this situation, then where does the cost go to? It goes to 
the consumer.
  Mr. Chairman, we should be opposed to this mortgage tax increase.

                              {time}  1745

  Mr. SCOTT of Georgia. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, I want to talk about this for a moment. First of all, 
let me just address the gentleman from Alabama's amendment, who's a 
very honorable person and a very, very good and highly thought-of 
colleague.
  But it's very important that we recognize that his amendment is 
designed to do one and one thing only, and that is to gut this bill. 
And that's what the design is. So no matter which way you talk, 
whatever the arguments you use, it's designed to gut the bill.
  Now, for the last year and a half, 2 years in our Committee on 
Financial Services, we've talked about the affordable housing trust 
fund. It has been moved out in many respects as a bipartisan measure.
  Now, this is tailored. It's tailored specifically. I want to put into 
the Record a letter. It comes from the Most Reverend Nicholas DiMarzio, 
who is the Bishop of Brooklyn, Chairman of the Domestic Policy 
Committee for the United States Conference of Catholic Bishops. Here is 
what he says.
  He says, ``As Chairman of the Domestic Policy Committee of the United 
States Conference of Catholic Bishops, I write in strong support of a 
provision in H.R. 1427, the Federal Housing Financial Reform Act of 
2007, that provides some $500 million a year from Fannie Mae and 
Freddie Mac as a dedicated source of funding for an affordable housing 
trust fund.
  ``As you know, the Catholic community serves tens of thousands of men 
and women and children who struggle to avoid homelessness and maintain 
adequate housing. Besides sheltering homeless people who turn to us for 
help, our Catholic Charities, agencies, dioceses and parishes have 
built and continue to maintain thousands of affordable units. But 
despite our efforts and the efforts of so many others, there is just 
not enough affordable housing available. And we believe that a trust 
fund will be a stable source of money for building and rehabilitating 
affordable housing for very low income people.
  ``Our experience demonstrates to us how homelessness and inadequate, 
substandard housing destroys lives, undermines families, hurts 
communities and weakens the very social fabric of our Nation. By 
setting aside money for a National Housing Trust Fund, Congress acts to 
make the shelter needs of low income families a national priority.''
  This brings us to the crux of this matter. And the crux of this 
matter, gentleman from Alabama, and my colleagues on the other side of 
the aisle, is that we have a pressing need. We have a pressing need for 
affordable housing. And nowhere is that pressing need more pressing 
than in Louisiana and Mississippi, where this is targeted to.
  How those people have suffered; how much they've begged and pleaded 
for help. And yes, we have passed Katrina funds, but not for this.
  And in committee, time and time again, we've raised these issues, and 
your very amendment, my distinguished friend from Alabama, was defeated 
in committee.
  Now, it's very clear that 75 percent of the affordable housing funds 
available in the first year will go to Louisiana. 25 percent of such 
funds will go to Mississippi for affordable housing arising

[[Page 13185]]

out of the costs and out of the terrible agonies of Hurricanes Katrina 
and Rita.
  It's about time that we responded to these needs. And there's no 
better way of dealing with it than through Fannie Mae and Freddie Mac.
  But I do want to set the record straight so we understand, from the 
point from the gentleman from New Jersey and others, and the public 
who's listening to this debate and watching this debate, to make sure 
that you understand exactly what this housing fund is based upon. It is 
funds and where the funds are derived from. They're derived through 
contributions by Fannie Mae and Freddie Mac in amounts equal to 1.2 
basic points on each GSE's total outstanding mortgages, including both 
those held in the portfolio and those that have been securitized each 
year, from 2007 through 2011. And the program sunsets in 5 years. This 
is not a permanency. This is an emergency situation where affordable 
housing is needed. We're infusing this in. We're targeting it to the 
area in this country where the greatest need is, and then we're 
sunsetting it in 5 years. That's the responsible way of doing it. And I 
submit that the gentleman's amendment should be defeated.
  Mr. HENSARLING. Mr. Chairman, I move to strike the requisite number 
of words.
  I'd like to yield 30 seconds to the ranking member.
  Mr. BACHUS. I appreciate the gentleman from Texas.
  Let me say this to the gentleman from Georgia. He said that my 
amendment guts the bill because, as he sees it, the bill is this 
pressing need for affordable housing, when I say this bill is all about 
establishing an independent world class regulator for Fannie and 
Freddie. So I think that is true. I think you're acknowledging that 
what we're doing is establishing a strong regulator. What y'all are 
doing is establishing an affordable housing fund.
  Mr. SCOTT of Georgia. Will the gentleman yield for one moment, 
please? Who better to deal with affordable housing than Fannie Mae and 
Freddie Mac?
  Mr. HENSARLING. Reclaiming my time.
  The CHAIRMAN. The gentleman from Texas controls the time.
  Mr. HENSARLING. Mr. Chairman, I heard the gentleman from Georgia 
earlier read some correspondence from a bishop. I don't have any 
correspondence from a bishop this evening, but I do have some 
correspondence from some hard working families in the Fifth 
Congressional District of Texas talking about what we could do to make 
their housing affordable. And I think it's particularly important when 
we think about my friends from the other side of the aisle earlier 
today, literally just a couple of hours ago, passing the single largest 
tax increase in American history that will amount to roughly $2,700 a 
year on the families in the Fifth District of Texas.
  I heard from the Freeman family in Mesquite, and they wrote me, that 
``With the extra $2,700 being forced to pay to Washington, my family 
could lose our home, or we may be forced to give up education because 
the money won't be there to pay for it. It is really unfair that the 
low man on the totem pole is always having to give everything up. These 
extra taxes are not needed.''
  Well, one way we can make housing affordable is not tax people with 
homes in the first place.
  I heard from the Kirkendoll family in Garland, Texas. ``Dear 
Congressman Hensarling, I am unemployed on Social Security and my wife 
works. At this point, between taxes and utilities, we're at the 
breaking point of being able to keep a home.''
  You know, one of the greatest ways that a home is affordable is you 
don't take money away from the family in the first place. And so, 
besides the single largest tax increase in American history that the 
Democrat majority passed earlier today, now they want to pass on a 
mortgage tax on hard working families struggling to make ends meet as 
well.
  I heard from the Stevens family in Mesquite, Texas. ``Congressman 
Hensarling, I wanted to let you know that I'm a single mom that does 
not receive any type of child support, and a tax increase of this 
amount would break me. I would be at risk of losing my home with this 
type of increase. I'm writing to ask your help to keep this from 
happening. This will be devastating to middle income families and 
families in my situation.''
  Mr. Chairman, I have many more letters like this. And so we've heard 
so much rhetoric from our friends on the other side of the aisle that 
somehow we don't care about affordable housing. The greatest affordable 
housing program in the history of this Nation is a good job and a low 
tax rate. And yet, with the single largest tax increase in American 
history passed by the majority earlier today, they threaten the almost 
8 million new jobs empowering people to buy homes. You take the tax 
relief away. You increase taxes on capital dividends, capital gains, 
you start taking those jobs away.
  And then you pass on this roughly $2,700 a year on hard working 
families all over America, you've got a double whammy. You start taking 
their jobs away, and then you start taking their ability to pay for 
these mortgages.
  I listened very closely to the chairman of the committee earlier when 
he accused the gentleman of New Jersey from, I guess, subscribing to 
naive economics. I will admit, it's been a number of years ago, but I 
actually studied economics. I have a degree in economics. I spent 10 
years in private business. And what I know about economics is that when 
you have a government sanctioned duopoly, as opposed to an atomistic 
competitive marketplace, they have a great ability to pass on costs to 
their customers, in this case, ultimately, the homeowner.
  So I guess the gentleman, our chairman, has studied a different 
economics than I do. And I did listen when the chairman said that it's 
the shareholders that will pay. So I'm offering an amendment later this 
evening that says this so-called affordable housing fund will go away 
if the regulator determines that interest rates go up. And since the 
chairman believes that only shareholders will pay, I look forward to 
him accepting that amendment.
  Ms. WATERS. Mr. Chairman, I move to strike the requisite number of 
words.
  Mr. Chairman and Members, I am surprised at the information that is 
being given from my friends on the opposite side of the aisle about 
this bill. Mr. Garrett from New Jersey gets up and talks about the 
mortgage tax increase. There is no MTI. He made that up. There is no 
MTI identified in and for this bill. I don't know where they're getting 
this from. They have vivid imaginations, and they would have you 
believe that somehow, in order to create this housing trust fund and 
have the GSEs participate in it, there must be something that they've 
made up called a mortgage tax increase.
  Did anyone tell my friends on the opposite side of the aisle that the 
GSEs have many places they can take the money from?
  First of all, it is important for everyone to know and understand, 
this money does not come from the general fund. This money does not 
come from something called an MTI. This is after-profit tax from the 
GSEs. And they have all of these programs, they have not only programs 
that they could eliminate, they could rearrange, and get millions of 
dollars from, but the investors, instead of getting huge profits, they 
could be reduced a little bit so that money could go into this housing 
trust fund.
  You would think that the Members on the opposite side of the aisle 
don't have a housing crisis in their district. Well, I've been to 
Alabama. I've been in Mr. Bachus' district. I want to tell you, he's 
got some terrible housing problems. He's got a crisis.
  But Mr. Hensarling does, too. I don't know where those letters are 
coming from, but let me tell you about his district. Renter households, 
81,740 including 14,931 extremely low income households in Mr. 
Hensarling's district.
  Of these extremely poor households, 56 percent of them are paying 
more than half of their incomes for housing. In this district, there's 
a deficit of 9,571

[[Page 13186]]

units that are affordable and available to extremely poor households.
  I don't mind speaking up for the least of these and poor. I don't 
mind trying to help the people in my district. But I do mind carrying 
the burden for all over America, for districts where there are people 
in need, and somehow their representatives forget to represent them.
  And my friend would have you believe that he's so concerned about the 
safety and soundness of these GSEs, and that they want independent 
world class regulation. And we've created that in this bill, we have 
compromised, we have worked with them, we have put a new agency in. We 
have done a great job.
  Are you willing to sacrifice that because you don't believe the 
government should participate in helping the least of these get some 
low income housing? Are you willing to give up all that we have worked 
for to ensure that we have GSEs that are safe and sound because you 
don't want to help poor people, low income people, people who work 
every day but simply cannot afford to own a home or have a decent place 
to live?

                              {time}  1800

  I don't think so. I know some of my friends on the opposite side of 
the aisle may have some questions about how this is all going to work, 
but I really don't believe that what you mean is that you would give up 
this bill; that you would rather not see this bill passed, with all of 
the good that is in it, even FM Watch that was organized some time ago 
to deal with bringing down the GSEs or supporting this housing trust 
fund. These are your friends that you have worked with. They like the 
bill and they like the housing trust fund, and they have letters of 
support that they have passed out all over this Congress.
  So I would say that even if you have some questions, you don't quite 
understand it, understand this: A housing crisis, people in need, 
moneys that can be gotten from GSEs that does not create something 
called an MTI, that can help people to have a decent quality of life. 
Just understand that. And couple that with the knowledge that you have 
worked very hard to make sure that these GSEs are safe and sound and 
you don't want to give that up at this point.
  The Acting CHAIRMAN (Mr. Hastings of Florida). The question is on the 
amendment offered by the gentleman from Alabama (Mr. Bachus).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.
  Mr. BACHUS. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Alabama will 
be postponed.


               Amendment No. 22 Offered by Mr. Kanjorski

  Mr. KANJORSKI. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 22 offered by Mr. Kanjorski:
       Page 300, line 24, strike ``, and'' and insert the 
     following: ``. The Federal Housing Enterprise Board may 
     recommend individuals who are identified by the Board's own 
     independent process or included on a list of individuals 
     recommended by the board of directors of the Bank involved, 
     which shall be submitted to the Federal Housing Enterprise 
     Board by such board of directors. The number of individuals 
     on any such list submitted by a Bank's board of directors 
     shall be equal to at least two times the number of 
     independent directorships to be filled. All independent 
     directors appointed''.

  Mr. KANJORSKI. Mr. Chairman, this amendment is drawn for the purposes 
of clarifying the process used by the new regulator's advisory 
committee to recommend candidates to serve as independent directors on 
the boards of each of the Federal Home Loan Banks. This proposal is a 
simple, yet important, corporate governance reform.
  Today, the Federal Home Loan Banks benefit from the service and the 
guidance of individuals appointed by the regulator to serve on the 
boards of each of the Federal Home Loan Banks in addition to those 
board directors elected by member financial institutions. Because the 
public-private partnership in guiding and monitoring the activities of 
a Federal Home Loan Bank is an important one, H.R. 1427 would preserve 
the election and appointment systems for constituting the Federal Home 
Loan Bank boards.
  Under the bill the advisory committee would recommend a list of 
individuals to serve as appointed independent directors to the head of 
the new regulatory agency. This individual would then make the final 
determination about whom to appoint to the independent director seats 
on the boards of each of the Federal Home Loan Banks.
  Independent directors help to focus a Federal Home Loan Bank on its 
statutory mission. These public appointees also help to ensure that 
each board has the knowledge, skills, and expertise needed to properly 
direct and supervise the management of the Federal Home Loan Bank. For 
this appointment system to work best and for independent directors to 
perform the role that Congress intended, the director of the new 
regulatory agency overseeing the housing government-sponsored 
enterprises should have a choice among a variety of qualified 
candidates when making appointments just as the voters should have a 
choice of candidates in elections. My amendment would allow such a 
choice to occur via two specific methods:
  First, it would allow the advisory board to establish its own 
independent process for identifying individuals to serve as appointed 
directors. Second, the amendment would build on the rulemaking recently 
adopted by the existing regulator that has the boards at each of the 
Federal Home Loan Banks recommending individuals to serve as 
independent directors.
  Under this second route, each board of directors at a Federal Home 
Loan Bank would put forward at least two candidates for each vacant 
independent director seat. If a board submitted just one name for 
consideration, we could create a system by which the independent 
directors could become beholden to the group that nominated them.
  For the appointed directors to remain effective and push the system's 
mission, we need to make sure that we keep their independence in place. 
By mandating that a Federal Home Loan Bank board provide at least two 
recommendations, we will help to prevent these unusually cozy 
relationships from ever developing.
  In sum, Mr. Chairman, my amendment refines the processes to be used 
by the Federal Housing Enterprise Board in recommending individuals to 
serve as appointed directors on the boards of the Federal Home Loan 
Banks in a way that helps to preserve their independence and to ensure 
that they help a Federal Home Loan Bank to achieve its intended 
mandatory objectives.
  I urge the adoption of this proposal.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
  Mr. KANJORSKI. I yield to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Chairman, I thank the gentleman for 
yielding.
  I want to express my support for this. We have talked to Members on 
the other side. My understanding, this is one of nine that was going to 
be agreed to.
  The gentleman from Pennsylvania has been one of the leading Members 
of the House in insisting on the public functioning of this board and 
the members, and this is another chapter in the book he is writing 
about how to protect the input here from citizens. So I strongly hope 
that the amendment is adopted. It is my understanding that it was 
acceptable on the Republican side as well.
  Mr. HASTINGS of Florida. The question is on the amendment offered by 
the gentleman from Pennsylvania (Mr. Kanjorski).
  The amendment was agreed to.


               Amendment No. 29 Offered by Mr. Hensarling

  Mr. HENSARLING. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.

[[Page 13187]]

  The text of the amendment is as follows:

       Amendment No. 29 offered by Mr. Hensarling:
       Page 128, line 22, strike ``temporarily''.
       Page 129, line 4, strike ``or''.
       Page 129, line 7, strike the period and insert ``; or''.
       Page 129, after line 7, insert the following:
       ``(D) are contributing to an increase in the cost of 
     mortgages to homebuyers.''.

  Mr. HENSARLING. Mr. Chairman, I actually had alluded to this. I hope 
that the chairman was able to listen at the time. This goes further 
into the discussion of the mortgage tax that those of us on this side 
of the aisle believe is being imposed upon the American people by this 
so-called Affordable Housing Fund.
  Earlier this evening the chairman said that he believes that this 
will be paid by the shareholders. We believe on this side of the aisle 
that, due to the duopoly power, the Fannie and Freddie, that they 
already control roughly 80 percent of the market in which they operate, 
that a substantial portion of the cost of the so-called Affordable 
Housing Fund will, indeed, be imposed upon homeowners in the form of 
higher mortgages, indeed, functionally a mortgage tax, a new mortgage 
tax on the American people.
  I was heartened to hear, although I disagree with his economic 
analysis, that the chairman has concluded that this will be paid by the 
shareholders.
  My amendment is fairly simple. It amends the section dealing with 
having the regulator suspend the program. Now, we know that within the 
language the program can be suspended, essentially, dealing with 
systemic risk of the economy. What my amendment does is, if the 
regulator finds out that, contrary to the chairman's opinion, that 
there is a mortgage tax, that indeed it has an adverse impact upon the 
cost of housing in America, that mortgages rise, that the program will 
be terminated.
  So, again, I hope I understood the chairman correctly when he said 
that he thought this cost would go to shareholders. If he does, I would 
hope that he would accept the amendment. And if the chairman chooses 
not to accept the amendment, and I am sure the gentleman will let us 
know soon, then I guess what we are admitting is that, indeed, there is 
a mortgage tax to be imposed on hardworking homeowners, some of which 
we heard from earlier this evening from the Fifth District of Texas, 
and we know how an additional tax is going to adversely impact them in 
the ability to keep their homes.
  So I hope the chairman is right that shareholders, as opposed to 
homeowners, end up paying this if we are going to be stuck with this 
particular program.
  So this is a very simple amendment that says if we have a mortgage 
tax, the program is suspended. If we are confident there is no mortgage 
tax, then there shouldn't be any opposition to this particular 
legislation.
  With that, Mr. Chairman, I request an ``aye'' vote.
  Mr. FRANK of Massachusetts. Mr. Chairman, I move to strike the last 
word.
  Mr. Chairman, this is another effort to try to kill the fund, this 
time by obfuscation.
  We have tried to work out some agreement. There are about 11 
different amendments that try to do the same thing. Members should just 
be ready to be here all night and maybe until Tuesday or come back on 
Tuesday.
  I understand the objections to the fund. What I don't understand is 
why Members wouldn't be willing to accept two, maybe three chances to 
defeat it.
  Now, with regard to the economics, first of all, there is this myth 
that we have said it's not coming from anywhere. We do believe that it 
will come primarily from the shareholders.
  By the way, in earlier debates on this, some of the opponents of the 
bill said the same thing. If you go back and look at the transcripts of 
our committee, although I can't understand why anybody would want to do 
that, you will find people saying we were unfairly levying on the 
shareholders. That didn't work.
  There are people who do not believe that the Federal Government 
should be encouraging the construction of affordable housing, and 
understand that however we propose to do it, they will object to it. If 
we try to do it through appropriations, that will be a problem because 
of the deficit. Here we try to do it by taking, we believe, essentially 
from the profits of Fannie Mae and Freddie Mac.
  Now, as to the legitimacy of their concern, I will repeat, and the 
gentleman from New Jersey seemed annoyed when I mentioned it, he has an 
amendment that, by making restrictions on the portfolio of Fannie Mae 
and Freddie Mac, their main profit generators, would hit their profits 
far more than anything you could conceivably attribute to this 
amendment. So it would have, if you believe that this is going to hurt 
the borrowers, a much more negative effect.
  I heard the gentleman from Texas say this is a government-sanctioned 
duopoly. At one point it might have been. In fact, today, the 
securitization market is far more competitive. It's not atomistic, but 
there are states, economic states, between duopoly and atomic, and this 
is where we are here. There are significant private competitors to 
Fannie Mae and Freddie Mac. You will know that because some Members, 
Mr. Chairman, have heard from them who don't like what we are doing 
here. And we believe that the primary burden here will come from the 
shareholders. The notion that Fannie Mae and Freddie Mac can raise 
prices at will does not seem to me to reflect economic reality.
  Now, the gentleman from New Jersey said why don't you pass a statute 
saying that? That is the naivete of economics. You can't pass a law 
that says economic reality shall be X or Y or Z. There is an interplay 
among various forces. We do believe that the great bulk of this will 
come from the shareholders.
  By the way, it amounts to 5 percent of the profit. Other amendments 
would restrict the profit by far more. And if people legitimately 
believe that any restriction on the profit was going to hurt the 
mortgage borrowers, then they wouldn't be offering those other 
amendments.
  There is a common thread here. They don't think the Federal 
Government should help build affordable housing. We strongly disagree 
with that. We believe that the Federal Government should. The 
calculation that is being asked to be made here is a very difficult one 
to make.
  The gentleman prides himself on his economic expertise that he 
learned some time ago. I don't know where he learned that you could 
easily make this kind of calculation. There will be legitimate debate.

                              {time}  1815

  And by the way, what he does say here is that if at any point it 
turns out that there is an impact, you know, things can happen slow, 
the competitive situation can be more or less, a lot of factors will 
affect this. If at any point it happens, then the fund is permanently 
shut down. You will note that he strikes the word ``temporarily.'' This 
is an effort, once again, to kill the fund.
  Mr. HENSARLING. Will the gentleman yield?
  Mr. FRANK of Massachusetts. Not yet.
  I understand people who don't like it. And by the way, I would note 
again, not the gentleman from Texas, but 209 Republicans in October 
2005 voted for legislation that included exactly this sort of fund. 
Some of us voted against it because of a provision that is not now in 
this bill that would have kept the Catholic Church and others in the 
religious field from building housing. But I don't understand why, if 
it's so terrible today, it wasn't then.
  Mr. Chairman, now I will yield to the gentleman.
  Mr. HENSARLING. I thank the chairman for yielding.
  I want to make it very clear; I have agendas, I don't have hidden 
agendas. I want to make it very clear, I do disagree with this program. 
But if we are going to have the program----
  Mr. FRANK of Massachusetts. I'm sorry, I didn't hear what you said.
  Mr. HENSARLING. Again, I thank the chairman for yielding.

[[Page 13188]]

  I simply said that you seem to imply that this was designed to 
somehow kill the program. I just wanted to make it very clear that any 
way I could get rid of this program, I would. But I would ask the 
chairman for a clarification.
  Mr. FRANK of Massachusetts. I thank the gentleman, and I understand 
that. And that's clearly what's involved here. And we will hear four or 
five different ways to do it.
  Let me just say this; this has now become a late night TV commercial, 
it might be a late night debate. It will slice, it will dice, it will 
cut. We are going to see the magic nine cut knife as a way to kill the 
Affordable Housing Program. And we will have everybody but a TV 
pitchman demonstrating it. And maybe he will throw in a few Ginsu 
knives as well to knock off a couple other programs, but this is simply 
one more assault out of many that we will hear today on affordable 
housing.
  Mr. PRICE of Georgia. Mr. Chairman, I move to strike the last word, 
and I yield to the gentleman from Texas.
  Mr. HENSARLING. I thank the gentleman for yielding.
  I was going to ask the chairman for a clarification. What I heard 
earlier in the evening is that shareholders will pay the cost of the 
Affordable Housing Fund. And what I think I'm hearing now is that the 
shareholders will pay substantially most of the housing fund, which 
leaves some portion paid by somebody else.
  So I am asking the chairman, in his opinion, if it is no longer being 
paid totally by the shareholders, doesn't that mean that some portion 
is indeed being paid by the homeowner? Thus, we can debate the quantity 
of the mortgage tax that will be imposed upon the homeowner. But it 
seems to me if we've gone from total shareholder payment to substantial 
shareholder payment, there is a mortgage tax. And I might request the 
gentleman from Georgia to yield to the chairman for clarification.
  Mr. PRICE of Georgia. I yield to the chairman.
  Mr. FRANK of Massachusetts. Well, in the first place, the universe is 
not exhausted by the borrowers and the shareholders. There are banks 
involved. There are many other people in the transaction. And yes, I 
think there will be various distributions, of course, and it will 
differ at different times and different economic circumstances, 
depending on the competitive situation.
  I believe that it is possible in some circumstances a very small 
percentage of the 5 percent might go on to the mortgages. It is likely 
to be de minimis. And the answer is it doesn't come just from the 
shareholders, it comes from the banks, from the mortgage brokers----
  Mr. HENSARLING. Thank you.
  Mr. PRICE of Georgia. Reclaiming my time.
  Mr. FRANK of Massachusetts. I'm sorry for trying to answer the 
question.
  Mr. PRICE of Georgia. I appreciate the chairman's candor, because 
what we have just heard from the chairman is important because it's the 
first time that the chairman has recognized and appreciated that, in 
fact, mortgages will go up, and they will go up on individuals that may 
be the least able to afford them in this Nation. And therefore, I think 
the contention of my good friend from Texas, that this is indeed a 
mortgage tax on individuals least likely to be able to afford them is 
accurate. I appreciate the gentleman pointing that out.
  Mr. BLUMENAUER. Mr. Chairman, I move to strike the requisite words.
  Mr. Chairman, one listens to the ebb and flow of this debate, and you 
sort of lose track of what it is that we are about here this evening.
  As Senator Moynihan said, that we're entitled to our own opinions, 
we're not entitled to our own facts. And perhaps if my friend from 
Texas had spent less time making up things to try and scare people back 
home in terms of political fantasy and spent some time dealing with the 
substance that we have here this evening, we would have less 
disagreement.
  It was cited earlier that this proposal is an experiment in 
socialism. Well, one can look at the history of how the special status 
of these entities evolved from being government agencies to being in 
this special hybrid status of the government-sponsored enterprises. The 
fact is that the Federal Government sets the ground rules. Congress 
sets the ground rules.
  As my friend, the chairman of the committee, pointed out, that there 
are costs associated with everything we do. Goals for affordable 
housing entail some cost. The regulations entail some cost and 
consequence. Focusing in on the lowest income has some costs and 
consequences. This is all right. This is what we are about here this 
evening is to determine whether or not, as Congress exercises its 
oversight, its focus, that it is appropriate in nature and it is 
reasonable in its outcome.
  Mr. Frank has pointed out that what we are talking about here, in 
terms of this fund, is a tiny fraction of the overall profits of multi 
trillion dollar holdings. He has also pointed out, and something that 
has not been refuted by our friends who are trying to kill it, is that 
there are other proposals that they are talking about which would bear 
far greater impact on the profitability of the enterprises. The 
question we should be asking is whether the goal is one that is 
appropriate. And it seems to me very strongly that what has been 
identified here is an appropriate goal. It is consistent with the 
creation of these entities. It speaks to a crying need in community 
after community.
  I would strongly urge that we vote down this and each of these 
proposals to gut this essential provision that would help us make 
substantial progress in providing affordable housing for those who need 
it most.
  Mr. SCOTT of Georgia. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, I really believe that it is so comical to see our 
friends on the other side of the aisle come up with the various and 
different ways to so-called ``skin this cat'' and gut the bill. This is 
very clever way my great friend from Texas, whom I have great respect 
for (Mr. Hensarling), but, Mr. Chairman, let me just read for the 
Record exactly what his amendment says so that we can really fully 
understand the lengths to creative linguistic judgments that they will 
go to cleverly try to skin the cat and gut the bill.
  Mr. Hensarling says his amendment will permanently eliminate the 
Affordable Housing Fund contributions in the case of certain factors in 
the bill that, as written, merely require a suspension of fund 
contributions. And two, also requires permanent eliminations of the 
Affordable Housing Fund contributions if a determination is made that 
such contributions are contributing to an increase in the cost of 
mortgages to home buyers. Putting the issue in a considerably complex 
box.
  Now, we know from the dynamics of economics what is happening in our 
society today, especially in the housing market. We know what the 
ravages of Hurricane Rita and Katrina has done to the area which we are 
targeting the bill. We also know that there is no segment in society 
that is most impacted and in need of affordable housing than the very, 
very poor, those people who need the help. This is where this bill is 
being targeted.
  And his amendment would prevent the reinstatement of affordable 
housing funds when a GSE's financial problems temporarily cause a 
suspension of funds contributions is resolved, and would also create a 
new condition to shut down the fund that could arbitrarily result in 
the permanent elimination of the Affordable Housing Fund. That is 
exactly what the gentleman's amendment does, and that is exactly why we 
need to defeat it.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Texas (Mr. Hensarling).
  The question was taken; and the Acting Chairman announced that the 
noes appeared to have it.
  Mr. HENSARLING. Mr. Chairman, I demand a recorded vote.
  The Acting CHAIRMAN. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Texas will 
be postponed.


                Amendment No. 21 Offered by Mr. Hinojosa

  Mr. HINOJOSA. Mr. Chairman, I offer an amendment.

[[Page 13189]]

  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 21 offered by Mr. Hinojosa:
       Page 140, line 3, before the semicolon insert the 
     following: ``; except that the Director may, at the request 
     of a State, waive the requirements of this subparagraph with 
     respect to a geographic area or areas within the State if (i) 
     the travel time or distance involved in providing counseling 
     with respect to such area or areas, as otherwise required 
     under this subparagraph, on an in-person basis is excessive 
     or the cost of such travel is prohibitive, and (ii) the State 
     provides alternative forms of counseling for such area or 
     areas, which may include interactive telephone counseling, 
     on-line counseling, interactive video counseling, and 
     interactive home study counseling''.

  Mr. HINOJOSA. Mr. Chairman, today I am offering an amendment to the 
housing counseling amendment that I passed in committee. Today's 
amendment will permit States to seek a waiver of the in-person pre-
purchase housing counseling requirement if the person obtaining the 
mortgage lives in a remote area of the country, which includes the 
majority of rural America.
  I urge my colleagues to support the amendment.
  Mr. Chairman, during the Financial Services Committee mark up of H.R. 
1427, I offered an amendment to the Affordable Housing Fund section of 
H.R. 1427 that requires that homebuyers who fall below 50 percent of 
the median income obtain pre-purchase in-person housing counseling. The 
Committee adopted the amendment by voice vote.
  My amendment recognizes the fact that we have a very unstable housing 
market at the moment.
  It also acknowledges that minorities are becoming victims of 
predatory lending, and that the poorest of the poor, which includes a 
considerable percentage of my congressional district and other rural 
districts, need financial literacy in general--and in-person housing 
counseling in particular--before they enter into any kind of loan 
agreement.
  The amendment that passed in committee does not require any funding 
from the Affordable Housing Fund. The funding for such counseling 
usually comes from the Department of Housing and Urban Development or 
the States. My amendment merely requires that existing counseling 
information be provided in-person for those who fall below 50 percent 
of the median income, which tends to be renters.
  Today, I am offering an amendment to the housing counseling amendment 
that passed in committee. Today's amendment will permit states to seek 
a waiver of the in-person pre-purchase housing counseling requirement 
if the person obtaining that mortgage lives in a remote area of the 
country, which includes the majority of rural America.
  The alternative forms of housing counseling may include interactive 
telephone counseling, on-line counseling, interactive video 
conferencing, or interactive home study counseling. A complete waiver 
of the counseling requirement under Section (g)(2)(d) may be granted 
only for borrowers for whom it is not possible to provide such 
alternative forms of counseling. Very few households meet this 
criteria.
  Mr. Chairman, I believe that this amendment No. 21, provides states 
with the appropriate waiver authority they need to take into account 
the difficulties of providing in-person housing counseling, Financial 
Literacy Education, to those living in remote areas of the United 
States.
  I urge my colleagues to support amendment No. 21.
  Mr. FRANK of Massachusetts. Mr. Chairman, I am impressed with the 
precision and exactitude of my friend from Texas. I am actually used to 
Texans talking slower. I appreciate my friend getting to the point so 
quickly, and I apologize for my not being there.
  It is a very good amendment and I think has been agreed to by both 
sides.
  The gentleman from Texas has been a strong proponent of housing 
counseling. We all agree that if we had had more of that earlier, we 
might have less of a problem than we have today. He has been very 
strong on the questions of literacy. So I very much appreciate this 
amendment and hope it is adopted.
  Mr. HINOJOSA. Mr. Chairman, I yield to the gentleman from Texas (Mr. 
Neugebauer).
  Mr. NEUGEBAUER. Mr. Chairman, we have no objection to the amendment.
  Mr. FRANK of Massachusetts. Thank you, Mr. Chairman. Not elegant, but 
effective. I hope the amendment is adopted.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Texas (Mr. Hinojosa).
  The amendment was agreed to.


               Amendment No. 4 Offered by Mr. Neugebauer

  Mr. NEUGEBAUER. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 4 offered by Mr. Neugebauer:
       Page 60, line 2, after ``posed'' insert ``to the 
     enterprises''.

                              {time}  1830

  Mr. NEUGEBAUER. Mr. Chairman, I rise tonight to make a clarifying 
amendment on this bill. One of the things that this bill does is it 
clarifies the amendment to ensure that the portfolio standard be based 
solely on the safety and soundness to the enterprises and not any of 
the broader systemic concerns.
  We have the financial housing industry financing model of the world. 
Because of the model we have in place today, America enjoys one of the 
highest home ownership rates in the history of this country. More 
people own a home today than at any time in the history of this 
country. Primarily a lot of that housing affordability and the ability 
for Americans has been because of our tremendous secondary market, the 
ability to provide home mortgages for Americans all over this country.
  This legislation clarifies that when the regulator looks at 
regulating this entity, that he looks at the safety and soundness of 
that entity and not external factors. Just like when we regulate banks, 
we set certain standards for their capital, for their loan ratios and 
all of those other factors, and we should not look at this entity any 
different than we look at other entities. So really this is a 
clarifying amendment. It just says we are going to look at the safety 
and soundness of how this company is running their business.
  We shouldn't put things out there that the regulator is not able to, 
quite honestly, articulate, because what is a systemic risk? That 
becomes a point of order that sometimes the regulator cannot explain 
what exactly the systemic risk is they believe it is. It is a way to 
limit their portfolios.
  I want to thank Ms. Bean of Illinois and Mr. Moore of Kansas and Mr. 
Miller of California for joining me in clarifying the importance of 
making sure that as we put together a first class world regulator for 
these very important entities to the American home ownership, that we 
do not put in place things that would inhibit the ability of these 
entities to be able to deliver the quality mortgage products that they 
have delivered to the country over these years.
  So I think this is a very clear amendment. It clarifies the language 
and makes sure we don't have any question about what the intent of the 
regulator is and what the duty of the regulator is. I encourage my 
colleagues to support this amendment.
  Ms. BEAN. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, I rise today in support of H.R. 1427. I want to thank 
Chairman Frank for his hard work in crafting such a strong GSE reform 
bill, and I am pleased that the Financial Services Committee was able 
to move this bill to the floor so quickly. Passage of this legislation 
is necessary to further strengthen the U.S. financial system and is 
essential in establishing a sound regulatory environment for the 
housing GSEs, Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
  In order to ensure that the GSEs are able to perform their 
Congressionally chartered functions as efficiently, successfully and 
safely as possible, Congress must put into place a robust, world class 
regulator capable of overseeing the safety and soundness of Fannie Mae 
and Freddie Mac's operations as well as their housing mission.
  However, over the last several months, as Congress has considered how 
best to achieve this goal, much attention has been drawn to the scope 
of

[[Page 13190]]

the new regulator's authority in developing criteria to oversee Fannie 
Mae and Freddie Mac's portfolios, which are critical in providing 
liquidity and stability to our Nation's housing market.
  On this issue in particular, I believe Chairman Frank's intent in 
crafting this legislation has been clear from the beginning, to provide 
bank-like oversight authority, to ensure the safe and sound operations 
of the GSE portfolios.
  However, when asked about the portfolio language Chairman Frank 
negotiated with Secretary Paulson, James Lockhart, the current GSE 
regulator, was quoted in January as saying, ``My view is that inherent 
in any safety and soundness activity, one has to be concerned about 
systemic risk, and I don't think it has to say the word to have that as 
a potential consideration.'' In contrast, during the committee's 
oversight hearing, Chairman Frank once again reiterated what has been 
his consistent view, that the language was envisioned to only cover 
mission and safety and soundness concerns.
  This apparent ambiguity about the interpretation of the bill's 
portfolio language fueled concerns on both sides of the aisle and 
underscores the need to clarify its intent.
  Mr. Chairman, the term ``safety and soundness'' is a well-defined 
term in banking law and regulation. What is less clear is the 
application of a so-called systemic risk standard. First, there is no 
systemic risk standard applicable to banks or financial services 
holding companies, and certainly no such standard imposed on the 
mortgages they hold.
  Second, the question of whether or not to apply a systemic risk 
standard to Fannie Mae and Freddie Mac has already been asked and 
answered definitively by this House. In the 109th Congress, 
Representative Royce offered an amendment to the GSE reform authorizing 
systemic risk as a consideration for regulating the GSE portfolios. 
This amendment was overwhelmingly rejected on a bipartisan vote of 346-
73.
  Such a strong repudiation highlights several of the questions the 
proponents of systemic risk have been unable to adequately address. 
Number one, how to define it; two, demonstrate how there could be a 
systemic risk to the overall economy that would not first trigger 
safety and soundness concerns to the enterprises themselves; and, 
three, why should GSEs be held to a different standard than other 
holders of mortgage assets.
  Furthermore, Mr. Chairman, I was extremely concerned yesterday 
following the administration's release of its official Statement of 
Administration Policy. In it, the administration suggests that the 
portfolio authority contained in H.R. 1427 helps to address the 
systemic risk that Fannie Mae and Freddie Mac pose to our financial 
system.
  The SAP leaves no doubt that the administration interprets the 
current language of H.R. 1427 to authorize an application of systemic 
risk, which is why I urge my colleagues to support this bipartisan 
amendment I am offering today with Representatives Neugebauer, Moore 
and Miller. As it did in the 109th Congress, the House must once again 
reject the vague notion of systemic risk and be clear that it is not 
intended to be a criterion applied by the new GSE regulator.
  This amendment is very straightforward. It would ensure if there is 
sufficient risk posed to each company, the regulator would have the 
authority to adjust the portfolio. However, the regulator would not be 
authorized to shrink, cap or limit the size of the GSE portfolios based 
simply upon a nebulous determination that the portfolios are too large 
or that they might pose a risk to the overall system.
  Again, I want to thank Representatives Randy Neugebauer, Dennis Moore 
and Gary Miller for their support and hard work on this issue. I am 
pleased the amendment has received such strong and broad-based support. 
I am equally pleased to see that portrayed associations representing 
the leaders have endorsed this amendment.
  Mr. GARY G. MILLER of California. Mr. Chairman, I move to strike the 
requisite word.
  I rise in support of this amendment. The GSE regulator should have 
authority to limit the size and growth of a GSE portfolio, but 
specifically addressing safety and soundness are mission concerns with 
respect to the institution. This was clearly the intent of the language 
that was introduced within the bill, and this merely clarifies the 
language in this amendment.
  This is a clarifying amendment, not a weakening of the regulator, and 
that needs to be clearly understood. The amendment mitigates concerns 
that the regulator could establish an overly broad scope in viewing 
possible risk to the portfolio.
  The goal of this bill is to create a strong regulator. This bill 
creates that. But such an overly broad view could lead to unnecessary 
limits on the enterprise's portfolio activity to the detriment of the 
housing financing system.
  The amendment would simply add three words, those are ``to the 
enterprise,'' to Factor 6 of section 115, so the language would read 
``any potential risks posed to the enterprise by the nature of the 
portfolio holding.''
  Systemic risk can be considered by the regulator, it just must be in 
the context of safety and soundness and the mission of a GSE. The 
problems we are having in the housing market today are basically in the 
subprime and the jumbo market. The reason is because about 18.1 percent 
of those loans are fixed-rate, 30-year loans. If you look at the 
conforming marketplace, 82 percent is a fixed-rate, 30-year loan.
  The problem in the marketplace is not GSEs in the conforming. The 
problem is in the subprime and jumbo. So you don't want a regulator to 
look at the problem in the marketplace and say let's limit the 
portfolio of a GSE, and restrict the only sector of the marketplace 
that is not having a high amount of defaults and foreclosures, to the 
detriment of the marketplace.
  If you go back to the 1980s and the 1990s when this country was in a 
major housing recession, if you went to a lender, it was almost 
impossible to get a loan if you did not comply with the conforming 
requirements. They would not make you a loan to build a house. And if 
you wanted to buy a house, it had to be based on the underwriting 
criteria of the conforming marketplace. Thereby, the lender could take 
and sell that loan off to the conforming market, which are the GSEs.
  Lenders at that point in time were facing foreclosures and default 
rates and having to set aside reserves to deal with it. They did not 
have the assets to go make loans and hold those loans in their 
portfolios, because they were limited based on the defaults they 
currently had. But they would make loans that met the criteria of the 
GSEs and the conforming marketplaces. Thereby you could go get loans.
  This amendment takes no authority out of the regulator's hands to 
address systemic risk related to safety and soundness or mission of the 
enterprise. But that is what we need to understand. If the enterprises' 
portfolio are properly regulated from the standpoint of safety and 
soundness, the issue of systemic risk becomes moot. Therefore, a 
broader scope of regulation of portfolios is overreaching and 
unnecessary in addressing this safety and soundness.
  The House previously rejected systemic risk in an amendment in the 
2005 bill by a vote of 73 to 346. At that point in the bill, in the 
109th Congress, we wanted to make sure that systemic risk only applied 
within the GSEs, not something outside, and it was clearly defeated. We 
did the right thing.
  The amendment is consistent with the agreement and with the 
statements by the Treasury and OFHEO and the portfolio provisions. The 
language is not intended in any way to weaken the agreement with the 
Treasury. Rather, it is an attempt to clarify the language in the bill 
to better reflect that agreement.
  As an original cosponsor of this bill, I believe this amendment is 
consistent with our intention for the portfolio provisions. Treasury 
Under Secretary Robert Steel confirmed this in his testimony to the 
committee on March 15 in an exchange with Chairman Frank, when Chairman 
Frank noticed that the current language ``could go beyond the safety 
and soundness mission.''

[[Page 13191]]

  Chairman Frank suggested to Secretary Steel that the language should 
be improved to ensure that the provisions would not be used beyond the 
scope, and Steel agreed at that point in time.
  Similarly, OFHEO Director Lockhart testified, ``My reading of the 
systemic risk is it's part of a regulator's job; it's part of safety 
and soundness.''
  Further, in a letter following the hearing, Lockhart wrote, ``We did 
agree that systemic risk outside of safety and soundness should not be 
a part of the regulator's approach.''
  What they are saying in our bill is that this needs to be clarified. 
This language does that. It is harmful to the housing markets to reduce 
GSE portfolios when it is absolutely unnecessary.
  We have to look at history and this GSE market has been very good. 
This amendment has been supported by the National Association of 
Realtors, the National Association of Homebuilders, the National 
Association of Mortgage Brokers, the National Association of Federal 
Credit Unions and the Independent Community Bankers of America.
  This is a good amendment, and I request an ``aye'' vote.
  Mr. MOORE of Kansas. Mr. Chairman, I move to strike the last word.
  As a cosponsor of this amendment, I rise in support of the effort of 
my colleagues from Illinois, Texas and California to amend and clarify 
language in H.R. 1427. I have served on the Financial Services 
Committee since I was elected to Congress in 1998, and in that time I 
have learned about the regulation of financial institutions.
  I strongly believe, Mr. Chairman, that the regulators of financial 
institutions likes GSEs, should have its authority to assess the risk 
of an enterprise and to protect the safety and soundness of those 
entities.
  H.R. 1427 grants the new regulators strong authority to promote 
safety and soundness. Within the scope of that authority is the power 
to require the GSEs to alter their portfolios in accordance with that 
goal. I am not aware of any financial institution whose regulator has 
the power to alter their business on the basis of potential risks it 
poses to the broader financial markets.
  Passage of this amendment would clarify the duties of the new 
regulator to focus on risk to the enterprises, which is consistent with 
the authority that other regulators to financial institutions currently 
possess.
  Mr. Chairman, GSEs fill a vital role in the housing market by 
providing stability, liquidity and affordability. The new regulator has 
the responsibility of ensuring the safety and soundness of GSEs, and in 
doing so it will protect the viability of the GSEs.
  In keeping with the purpose of H.R. 1427, the Bean-Neugebauer-Moore-
Miller amendment will ensure that there is certainty within the markets 
so that Freddie Mac and Fannie Mae will be able to continue to serve 
their charter, while being subject to new, robust regulation.
  Mr. Chairman, I urge my colleagues to adopt this.

                              {time}  1845

  Mr. BAKER. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, reluctantly, I must speak with concern about the 
gentleman's underlying proposed amendment. There are more than 
sufficient reasons for me to express these concerns in my opinion.
  Going back briefly into the record of the difficulties of Fannie Mae 
and Freddie Mac of their derivatives portfolio, I bring to the House's 
attention this OFHEO special report issued in 2003 in which they 
determined that senior management and the board were quite aware that 
the skills and systems in corporate accounting were at the least 
challenged, and that the derivatives group lacked sufficient knowledge 
and training to administer the risk.
  Nonetheless, they chose to move forward with an approach to FAS 133 
hedging that was complicated requiring huge volume of monthly 
accounting events as hedges were designated, and chose to structure 
some very complicated securitization transactions without proper 
guidance.
  In looking at the annual shareholder report, under their derivatives 
disclosure, they state: ``We principally used the following types of 
derivatives: Euro Interbank offered rate interest rate swaps; LIBOR 
based options including swaptions; LIBOR exchange traded futures and 
foreign currency swaps.
  If we go further and look to the counterparties with which the 
enterprises now must engage hedging strategies, we find that Deutsche 
Bank holds $38.952 billion of Freddie's; BNP Paribas, $28.156 billion; 
Barclays, $22 billion; Dresdner Bank, $4 billion; and please excuse me 
because my German is poor, Kreditanstalt fur Wiederaufbau holds $2.5 
billion.
  Now in understanding why we should have concern about the restraint 
of a regulator's authority to analyze the portfolio, the underlying 
safety and soundness conditions, and the elements of world economy that 
surround their hedging strategies, one only has to remember for a short 
moment the days surrounding LTCM when there was a Russian currency 
liquidity crisis, and people who had no expectation across several 
different currency transactions and swaps, were called upon to 
liquidate their positions and make cash available and were unable to do 
so.
  It led the Federal Reserve to meet an emergency session in the New 
York Fed office, and they were surprised to see who was sitting around 
the table holding these positions, including many commercial banks of 
whom they had no knowledge were participants.
  Let me say it this way, if you don't care about any of that, of our 
insured depository institutions in this country, almost 8,000, of the 
tier one capital requirement, that is money you have to have by law in 
your sock drawer. That says if it rains, you have money to mop up the 
floor. Almost 50 percent of them meet their tier one capital 
requirement by holding GSE securities. My goodness, if there were to be 
the slightest of stumble, it goes to the core of our financial 
depository institution's safety and soundness.
  There are foreign central banks invested in Fannies and Freddies, and 
if you don't care about that, at least think about your pensioners. 
There are billions of dollars of Fannies and Freddies spread across 
this economic fabric woven together in an extrinsically complicated 
matter, and we are going to tell this regulator you can only look 
through the keyhole, you can't look at the room? It makes no sense.
  Now I know I will probably lose on this position. The home builders 
are a powerful enterprise. But for the record, I want to be loud and 
clear, this is a mistake.
  Mr. Chairman, I would be happy to yield to the gentleman from 
Massachusetts.
  Mr. FRANK of Massachusetts. The gentleman from Louisiana has 
consistently been one of the most constructive Members in this regard. 
Some of us were not as tuned in as we should have been earlier, and I 
appreciate that.
  I differ with him somewhat in emphasis here because I do think if 
there were to be any of the threats that he very lucidly and cogently 
outlines, they would have to involve a threat to the safety and 
soundness of Freddie and Fannie. That is, I have a metaphor problem. I 
don't see Freddie and Fannie as pulling down the temple without getting 
a couple of rocks in their own head. But I do understand it is a matter 
of concern.
  Let me also add, I have some uneasiness because I have worked very 
closely, and all of us here have been the beneficiary of the very 
thoughtful approach of Secretary of the Treasury Paulson and Under 
Secretary Steel. We have come to some agreements.
  The Acting CHAIRMAN. The time of the gentleman from Louisiana has 
expired.
  Mr. FRANK of Massachusetts. Mr. Chairman, I move to strike the last 
word.
  As I was saying, Secretary Paulson and Under Secretary Steel made it 
possible for us to come to agreement.
  I would like to say to Mr. Baker, as he looks and as I look at who 
has come

[[Page 13192]]

there, and I think some statements were made that shouldn't have been 
made that made people nervous. I want to give my friend from Louisiana 
and others the assurance, Mr. Chairman, that assuming this wins, and it 
looks likely to, I don't consider it to be the last word on the 
subject. I think the concerns he has talked about are legitimate.
  We are going to have a bill from the other body, and we will get to a 
conference. I want to promise that I plan to continue to work with the 
gentleman from Louisiana, as well as the ranking members on the other 
side, the Secretary of the Treasury. We win here and we are going 
there. Maybe we have to move back a little bit. I understand where this 
comes from.
  I agree with him that I don't think there is a point now in trying to 
fight it here, but I do want to acknowledge that I don't consider it a 
solely settled issue, and I am hoping that we will find some way to 
accommodate the very legitimate concerns that he has as we go further.
  Mr. BAKER. Mr. Chairman, will the gentleman yield?
  Mr. FRANK of Massachusetts. I yield to the gentleman from Louisiana.
  Mr. BAKER. I certainly appreciate the chairman's comments and his 
recognition that the posture of the bill, if this amendment is adopted, 
may need further examination. I look forward to working with him on it.
  On a broader matter, let me say as to the construction of the bill 
generally, the chairman has done an extraordinary job of giving the 
regulator the powers and tools that he needs, save in this one area. I 
hope in moving forward, we can construct a box that makes appropriate 
regulatory sense. The Treasury has expressed these concerns to me 
tonight, and I am expressing those views on their behalf as well.
  Mr. FRANK of Massachusetts. Let me say, I appreciate that. The 
Treasury has chosen well in having you do it. I just want to give you 
my commitment that we will continue to work on this issue.
  Mr. HENSARLING. Mr. Chairman, I move to strike the last word.
  Mr. Chairman, I wish to associate myself with the comments of the 
gentleman from Louisiana. I, too, wish to raise my voice loud and clear 
on the issue, but certainly in a far less articulate manner than the 
gentleman from Louisiana who is well versed on this issue.
  In my opinion, Mr. Chairman, the only thing worse than a regulated 
monopoly is an unregulated monopoly. I don't necessarily trust private 
companies. I trust competitive marketplaces, and wherever Fannie and 
Freddie goes, I feel the competitive marketplace leaves.
  Since I have been on the committee 4\1/2\ years now, we have heard 
frequently from our past Federal Reserve chairman and our present 
Federal Reserve chairman. Their voices could not be more clear on the 
matter that they believe the GSEs pose a very significant systemic risk 
to our economy.
  Now in a competitive marketplace, you are punished for misleading 
accounting. In a competitive marketplace, you are punished for bad 
business decisions. In a competitive marketplace, you are certainly, 
certainly punished for fraud. We no longer have an Enron. We no longer 
have a WorldCom. We no longer have an Arthur Andersen. We no longer 
have a New Century.
  A competitive marketplace, before they could lead to systemic risk, 
took care of those who may have engaged in faulty accounting, fraud, or 
poor business decisions.
  But that is not the case with Fannie and Freddie. And now where we 
finally have empowered the regulator to do something, the first thing 
we do is clip his wings. I just feel on this matter, I am going to 
listen to Chairman Greenspan and I am going to listen to Chairman 
Bernanke, and I don't totally know the impact of the language of the 
people who offered the amendment, including my dear friend from Texas, 
completely, I don't know if I completely understand its impact, but 
what it seems to do, all of a sudden it seems to say well, the 
regulator can make sure that Fannie and Freddie can't harm themselves, 
but they can't make sure that they don't harm the rest of us. That is 
my interpretation of this amendment.
  So again, if we are going to sanction a government, if we are going 
to create essentially a duopoly, and the last time I looked at the 
records controlled 80 percent of the market in which they operate, and 
as opposed to retrenching, they seem to prosper when they misstate 
their earnings, when they have billions and billions of misstated 
earnings, when they mislead the government and when they mislead their 
investors, when they couldn't produce audited financials in years, and, 
I believe, hold more debt than the publicly held debt of the Federal 
Government, I think we ought to err on the side of strengthening the 
regulator's ability to protect us by the systemic risk of what we, we 
in Congress, have created in the first place.
  So I, too, wanted to raise my voice loud and clear on this issue. I 
certainly appreciate the chairman's willingness to work with the 
gentleman from Louisiana and others of us on the committee who are very 
concerned about the potential systemic risk posed by the activities of 
Fannie and Freddie.
  The Acting CHAIRMAN. The question is on the amendment offered by the 
gentleman from Texas (Mr. Neugebauer).
  The amendment was agreed to.


        Amendment En Bloc Offered by Mr. Frank of Massachusetts.

  Mr. FRANK of Massachusetts. Mr. Chairman, as the designee of the 
Members I am about to name, I ask unanimous consent that the following 
amendments be considered en bloc: No. 2 from Ms. Eddie Bernice Johnson 
of Texas with a modification which is at the desk; No. 3 from Mr. 
Boozman; No. 6 from Mr. Terry; No. 7 from Mr. Donnelly; No. 11 from Mr. 
Blunt; No. 20 from Mr. McCaul of Texas; and No. 31 from Mr. Baker.
  I ask further that the debate on the amendment en bloc and any 
amendment thereto be limited to 20 minutes, equally divided and 
controlled by the majority and minority.
  I am proud to report that I am the designee of all these people. I 
have rarely been so popular.
  The Acting CHAIRMAN. The Clerk will designate the amendments.
  Amendment en bloc consisting of amendment Nos. 2, 3, 6, 7, 11, 20 and 
31 offered by Mr. Frank of Massachusetts:


     Amendment No. 2 Offered by Ms. Eddie Bernice Johnson of Texas

  The text of the amendment is as follows:

       Page 140, line 3, before the semicolon insert the 
     following: ``and a program of financial literacy and 
     education to promote an understanding of consumer, economic, 
     and personal finance issues and concepts, including saving 
     for retirement, managing credit, long-term care, and estate 
     planning and education on predatory lending, identity theft, 
     and financial abuse schemes, that is approved by the 
     Director''.


                 Amendment No. 3 Offered by Mr. Boozman

  The text of the amendment is as follows:

       Page 139, strike lines 22 through 25 and insert the 
     following:
       ``(D) is made available for purchase only by, or in the 
     case of assistance under this paragraph, is made available 
     only to, homebuyers who have, before purchase--
       ``(i) completed a program''.
       Page 140, after line 3, insert the following:
       ``(ii) demonstrated, in accordance with regulations as the 
     Director shall issue setting forth requirements for 
     sufficient evidence, that they are lawfully present in the 
     United States; and''.


                  Amendment No. 6 Offered by Mr. Terry

  The text of the amendment is as follows:

       Page 303, line 4, strike ``and''.
       Page 303, after line 4, insert the following:
       (B) in the first sentence, by inserting after ``less than 
     one'' the following: ``or two, as determined by the board of 
     directors of the appropriate Federal home loan bank,''; and
       Page 303, line 5, strike ``(B)'' and insert ``(C)''.


                Amendment No. 7 Offered by Mr. Donnelly

  The text of the amendment is as follows:

       Page 140, line 3, before the semicolon insert the 
     following: ``, except that entities providing such counseling 
     shall not discriminate against any particular form of 
     housing''.


                 Amendment No. 11 Offered by Mr. Blunt

  The text of the amendment is as follows:


[[Page 13193]]

       Page 154, line 6, strike the closing quotation marks and 
     the last period.
       Page 154, after line 6, insert the following:
       ``(p) Funding Accountability and Transparency.--Any grant 
     under this section to a grantee from the affordable housing 
     fund established under subsection (a), any assistance 
     provided to a recipient by a grantee from affordable housing 
     fund grant amounts, and any grant, award, or other assistance 
     from an affordable housing trust fund referred to in 
     subsection (o) shall be considered a Federal award for 
     purposes of the Federal Funding Accountability and 
     Transparency Act of 2006 (31 U.S.C. 6101 note). Upon the 
     request of the Director of the Office of Management and 
     Budget, the Director of the Federal Housing Finance Agency 
     shall obtain and provide such information regarding any such 
     grants, assistance, and awards as the Director of the Office 
     of Management and Budget considers necessary to comply with 
     the requirements of such Act, as applicable pursuant to the 
     preceding sentence.''.


            Amendment No. 20 Offered by Mr. McCaul of Texas

  The text of the amendment is as follows:

       Page 154, line 3, after the period insert the following: 
     ``Notwithstanding any other provision of law, assistance 
     provided using amounts transferred to such affordable housing 
     trust fund pursuant to this subsection may not be used for 
     any of the activities specified in clauses (i) through (vi) 
     of subsection (i)(6).''.


                 Amendment No. 31 Offered by Mr. Baker

  The text of the amendment is as follows:

       Page 23, line 16, strike ``5 members'' and insert ``3 
     members''.
       Page 23, line 20, after the semicolon insert ``and''.
       Page 23, line 22, strike ``; and'' and insert a period.
       Strike line 23 on page 23 and all that follows through line 
     5 on page 24.


Modification to Amendment No. 2 Offered by Ms. Eddie Bernice Johnson of 
                                 Texas

  The Acting CHAIRMAN. The Clerk will report the modification to 
amendment No. 2.
  The Clerk read as follows:

       Modification to amendment No. 2 offered by Ms. Eddie 
     Bernice Johnson of Texas:
       In lieu of amendment No. 2, on page 140, line 3, before the 
     semicolon insert the following: ``and a program of financial 
     literacy and education to promote an understanding of 
     consumer, economic, and personal finance issues and concepts, 
     including saving for retirement, managing credit, long-term 
     care, and estate planning and education on predatory lending, 
     identity theft, and financial abuse schemes relating to 
     homeownership that is approved by the Director''.

  Mr. FRANK of Massachusetts (during the reading). Mr. Chairman, I ask 
unanimous consent that the modification be considered as read and 
printed in the Record.
  The Acting CHAIRMAN. Is there objection to the request of the 
gentleman from Massachusetts?
  There was no objection.
  The Acting CHAIRMAN. Without objection, amendment No. 2 is modified 
and the amendments shall be considered en bloc.
  There was no objection.
  The Acting CHAIRMAN. Without objection, the gentleman from 
Massachusetts (Mr. Frank) and a member of the minority each will 
control 10 minutes.
  There was no objection.
  The Chair recognizes the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to one of 
the authors, the gentlewoman from Texas (Ms. Eddie Bernice Johnson).
  Ms. EDDIE BERNICE JOHNSON of Texas. Mr. Chairman, I rise today to 
support this amendment and certainly want to thank the chairman of the 
committee and other members of the committee.
  My amendment, as modified, addresses the need for public knowledge 
and understanding of basic financial principles. It also seeks to 
reduce our Nation's already enormous consumer debt. My amendment 
requires that anyone who receives Federal assistance through the 
affordable housing fund committee attend a financial literacy program.
  We must educate our Nation's consumers to make informed decisions 
when managing their personal finances. Many consumers, especially first 
time homeowners, do not fully understand the complex financial 
agreements into which they are entering. For most families, their home 
is their single largest financial investment.
  Therefore, it is vital to provide working families with the knowledge 
on how to buy and keep their homes. The number of foreclosures rise 
every month all over the country. And in the Dallas area, we have one 
of the highest foreclosure rates in the Nation.
  My amendment will work to reduce the number of foreclosures and 
solidify a strong housing market. Education truly is the key to 
building a strong housing market and strong communities. Homeownership 
is a dream for many Americans. It represents security and it builds 
pride in our neighborhoods, and it is essential in creating positive, 
productive communities.
  My amendment will help families fully understand their financial 
commitments and allow them to successfully achieve their part of the 
American dream.
  I appreciate the chairman including my amendment en bloc.
  The Acting CHAIRMAN. The Chair recognizes the gentleman from Texas 
(Mr. Neugebauer) for 10 minutes.
  Mr. NEUGEBAUER. Mr. Chairman, I yield 5 minutes to the gentleman from 
Arkansas (Mr. Boozman).

                              {time}  1900

  Mr. BOOZMAN. Mr. Chairman, I thank the gentleman from Texas for 
yielding me so much time.
  In the interest of trying to curry favor with the gentleman from 
Massachusetts and the gentleman from Texas, I'll be very, very brief.
  My amendment is a very common-sense amendment that ensures that any 
homeowner applying for or receiving assistance through the affordable 
housing funds are in the United States legally.
  Not passing this amendment will only make it possible and probable, 
highly probable, that people residing in this country illegally will 
receive these benefits at the expense of U.S. taxpayers.
  Mr. FRANK of Massachusetts. Mr. Chairman, first I yield myself 30 
seconds to thank the gentleman from Arkansas.
  There are actually four amendments trying to achieve the same 
purpose. I must say I thought his did it in the best possible way, 
leaving flexibility. There may be legislation adopted. I am hoping this 
may save us some time later, but I do want to say we completely agree.
  Let's be clear now, with the adoption of this amendment, no one will 
be able to benefit from the Affordable Housing Fund who cannot 
demonstrate that he or she is legally in this country. I think that was 
very helpful. I'm glad that it's going to go through unanimously, and I 
thank the gentleman from Arkansas for the straightforward way in which 
he did it.
  Mr. Chairman, I believe there are no Members left on our side who 
need to be recognized, so I reserve the balance of my time.
  Mr. NEUGEBAUER. Mr. Chairman, it's my pleasure to yield 5 minutes to 
the gentleman from Texas (Mr. McCaul).
  Mr. McCAUL of Texas. Mr. Chairman, I rise today in support of an 
important amendment to H.R. 1427. As we all know, the underlying bill 
creates an Affordable Housing Fund. In addition, the bill provides for 
the establishment of an Affordable Housing Trust Fund, should Congress 
decide to create one in the future. All the moneys from the Affordable 
Housing Fund would then be transferred into the Affordable Housing 
Trust Fund.
  While I have serious concerns that a fund like this creates the 
opportunity for fraud, waste and abuse, and detracts from the 
bipartisan goal of GSE reform, I would like to commend the chairman of 
the Financial Services Committee for including in the bill a list of 
prohibited uses for the housing fund grants. These prohibitions include 
political activities, advocacy and lobbying.
  I know that my friends on the other side of the aisle agree with me 
when I say that government grants should not be used to fund political 
activities of any sort. If they didn't, they would not have included it 
in this bill.
  My amendment simply applies the exact same restrictions on any future 
trust fund. While an argument can be made against this amendment that 
the

[[Page 13194]]

prohibitions are implied in the text of the bill, it is important in my 
view that when we are dealing with the taxpayers' dollars that we are 
as clear and explicit as possible.
  I thank the chairman.
  Mr. FRANK of Massachusetts. Mr. Chairman, will the gentleman yield?
  Mr. McCAUL of Texas. I yield to the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. I thank the gentleman. I really 
appreciate his offering this amendment. As I said, I understand there 
will be some philosophical differences over the existence of the fund, 
but it certainly is incumbent upon us to make sure that that's all 
we're debating, not whether it would be misused or abused.
  We tried to deal with that. You never anticipate everything, and the 
gentleman's amendment is a very good addition of the kind of safeguards 
we want so that we can be debating the real issue and not other things, 
and so I am grateful that you're offering it.
  Mr. McCAUL of Texas. I thank the chairman.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield 2 minutes to the 
gentleman from Indiana (Mr. Donnelly).
  Mr. DONNELLY. Mr. Chairman, my amendment, along with my good friend 
and colleague, Mr. Feeney from Florida, will ensure that pre-purchase 
financial counselors for low income, first-time home buyers who are to 
receive Affordable Housing Fund grant moneys do not discriminate 
against any particular form of housing in the performance of their 
duties or rendering financial advice.
  My amendment will prohibit any existing biases from entering into the 
financial advice that counselors administer to first-time home buyers, 
and it ensures that the advice that they are providing is strictly 
financial, not editorial.
  These first-time home buyers need to have access to information about 
all of the types of affordable housing that is available to them, 
whether it is a manufactured home, condominium or any other form of 
quality affordable housing.
  We want to ensure that the people who benefit from this program have 
all of the information they need to make a sound decision based on 
their financial needs, but counselors should not steer them to or away 
from specific types of housing.
  Mr. Chairman, I urge my colleagues to support this amendment, and I 
see that my good friend Mr. Feeney is on the floor as well.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield 1\1/2\ minutes to 
the gentleman from Florida (Mr. Feeney).
  Mr. FEENEY. Mr. Chairman, I will not need that much. I thank the 
chairman. I thank Congressman Donnelly.
  I think it is important as we get people into counseling to give them 
the best advice about how they can qualify for good loans and how can 
get good credit and how they can take care of their financial needs as 
they move into housing that we not allow counselors to be biased in the 
forms of the housing that they may like or not, but give all of the 
options out to the customers.
  I want to applaud the gentleman for his good amendment. I want to 
encourage my colleagues to join in supporting it.
  Mr. FRANK of Massachusetts. Mr. Chairman, how much time do I have 
remaining?
  The Acting CHAIRMAN. The gentleman from Massachusetts (Mr. Frank) has 
6 minutes remaining. The gentleman from Texas (Mr. Neugebauer) has 7\1/
2\ minutes remaining.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield myself 2 minutes. I 
don't see other sponsors.
  Just to say, in the absence of the minority, I don't mean to be 
presumptuous and others may want to speak as well, but one of the 
amendments we're adopting was offered by the gentleman from Missouri, 
the minority whip, to require that any assistance provided in the fund 
from the National Affordable Housing Trust Fund be considered a Federal 
award for the purposes of the Federal Funding Accountability and 
Transparency Act, full disclosure, et cetera.
  I appreciate, once again, the gentleman from Missouri offering this. 
I have heard the gentleman from Texas' amendment. These are two 
safeguards that we neglected to put in.
  What it makes clear is that while this is not going to be Federal 
funding, it will be treated, since it comes from this Federal 
enactment, with all of the safeguards that would apply if it were 
Federal funds. And I think the whip has done a very good job in doing 
this. He's picked up an existing set of rules, and this is one more 
example I think of the extent to which, and I know this doesn't do away 
with all the controversies, but it does allow us to argue, as I said, 
on a philosophical basis.
  So I just want to acknowledge my appreciation to the whip for coming 
up with this, and I'm glad we're able to adopt it.
  Mr. Chairman, I reserve the balance of my time.
  Mr. NEUGEBAUER. Mr. Speaker, we have no other people to speak on this 
en bloc, and so I yield back the balance of my time.
  Mr. FRANK of Massachusetts. Mr. Chairman, I yield back the balance of 
my time.
  The Acting CHAIRMAN. The question is on the amendment en bloc offered 
by the gentleman from Massachusetts (Mr. Frank).
  The amendment en bloc was agreed to.


                Amendment No. 14 Offered by Mr. McHenry

  Mr. McHENRY. Mr. Chairman, I offer an amendment.
  The Acting CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment No. 14 offered by Mr. McHenry:
       Page 156, line 4, after ``Congress'' insert ``and the 
     Director of the Federal Housing Finance Agency''.
       Page 156, after line 4, insert the following new 
     subsection:
       (e) Determination and Suspension of Allocations.--Not later 
     than the expiration of the 3-month period that begins upon 
     the expiration of the period referred to in subsection (d), 
     the Director of the Federal Housing Finance Agency shall 
     review the report submitted pursuant to such subsection and 
     shall make an independent determination of whether the 
     requirement under section 1337(b) of the Housing and 
     Community Development Act of 1992 (as added by the amendment 
     made by subsection (a) of this section) that the enterprises 
     make allocations to the affordable housing fund established 
     under section 1337(a) of such Act--
       (1) will decrease the availability or affordability of 
     credit for homebuyers of one- to four-family residences; or
       (2) will increase the costs, to homebuyers, involved in 
     purchasing such residences.
     If the Director determines that such requirement will 
     decrease such availability or affordability, or will increase 
     the costs of purchasing such residences, notwithstanding such 
     section 1337(b) or any other provision of law, the 
     requirement under such section to allocate amounts to the 
     affordable housing fund shall not apply, and shall not have 
     any force or effect, with respect to the year in which such 
     determination is made or any year thereafter.

  Mr. McHENRY. Mr. Chairman, I want to start by commending the ranking 
member, Spencer Bachus, and the chairman of the Financial Services 
Committee, Mr. Frank, for the open dialogue that we've had in the 
Financial Services Committee and here on the floor. This amendment 
process I think has been a healthy one, and I appreciate the chairman 
engaging in this debate.
  The amendment that I offer today builds on an amendment offered and 
passed in the committee during markup, which I participated in and 
which I voted for the amendments as well. It requires a GAO study to 
investigate the Affordable Housing Fund's effects on availability and 
affordability of credit for home buyers. That's what the amendment 
added to the bill.
  Essentially the GAO study will tell if the costs of the funds are 
being passed on to home buyers. Some of us on this side of the aisle, 
many free market conservatives, believe that what is deemed the 
Affordable Housing Fund, the Housing Trust Fund, will be passed on 
straight to the mortgage consumers of America; in essence, a tax 
increase on those who have mortgages, especially middle income 
individuals.
  My amendment takes what is in the bill and goes it one step further. 
If, as a result of the GAO's report, the Director of the Federal 
Housing Finance Agency determines that the Affordable

[[Page 13195]]

Housing Fund is increasing mortgage costs for consumers, my amendment 
suspends the assessment of Freddie and Fannie. I think this is a 
healthy thing.
  As the bill stands, Freddie and Fannie will allocate an amount equal 
to 1.2 basis points of their total portfolio to the fund for fiscal 
years 2007 through 2011. Over these 5 years, the fund will accumulate 
an estimated $3 billion for the purposes of these housing initiatives. 
But Fannie and Freddie are publicly traded companies, and as someone 
who analyzed the economics of this, I'm concerned that a 1.2 basis 
point assessment of the total portfolio will simply be a 1.2 percent 
tax increase on those that have mortgages.
  And what I want to make sure is those costs are not going to be 
passed on to the consumer. What I'm concerned about is that it will be 
a mortgage tax increase, and that is the reason why I have concerns 
about the housing fund as it now stands.
  So what my amendment does is alleviate those concerns, and if my 
amendment passes, I think it would be far easier to accept the housing 
fund as it now stands, and that is my big concern with the bill.
  I want to commend the chairman for putting in much-needed reforms to 
Fannie and Freddie and the government-sponsored enterprises, and we 
want to make sure that middle income Americans, middle income home 
buyers will be able to have affordable access to mortgages. That's what 
Fannie and Freddie are there for. We want to make sure that this does 
not raise and increase the cost of home buying.
  I would ask my colleagues to support my simple amendment that would 
alleviate some concerns that we, on this side of the aisle, a few on 
this side of the aisle, have with this bill, and I encourage my 
colleagues to vote for it.
  Mr. SCOTT of Georgia. Mr. Chairman, I move to strike the last word.
  In response to the gentleman's amendment, let me just try to cut 
through a lot of this to get to exactly why we oppose this amendment 
and why it's important. And again, this amendment is again designed to 
obliterate the program.
  Now, it's very important for us to understand, we're dealing right 
now with a very volatile housing market. We're dealing with a situation 
where the subprime market has melted down. We're dealing with a 
situation where we've had record foreclosures. We're dealing with a 
situation where the area we're targeting this to go to first for the 
first year has suffered the worst natural disaster, where people are 
homeless as we speak.
  There is a need for government. We have a constitutional 
responsibility to take care of the public interests. If there ever was 
a need for the public interest, it is needed in affordable housing. We 
do not need this kind of amendment that in effect does this, all the 
studying he may want to say, and I respect the gentleman from North 
Carolina. I do not question his motives, and I do not dislike him as a 
person. I just dislike greatly his amendment because his amendment 
goes, again, at the effort to cut this bill, which is totally designed 
for the least of us, for people that can't afford it, for people that 
need our help.
  That's why we have this measure, and when you look at the 
marketplace, you cannot apply the activities of the free marketplace 
dealing with housing and put all of the convertibles you want to put on 
it as it applies to middle class or upper class individuals. We're not 
dealing with people with money. We're dealing with people that don't 
have any money. That's why we're providing this measure to them.
  So that if your amendment goes into effect, in effect you will be 
requiring the Director to determine if the GSE's allocations to the 
fund will decrease the availability or affordability of credit to home 
buyers or will increase the costs to home buyers. If the Director 
determines that the GSE's allocation to the fund will decrease the 
availability or affordability of credit to the home buyer will increase 
the costs to the home buyers, the requirement to allocate amounts to 
the funds shall be terminated.

                              {time}  1915

  All of that power you are putting arbitrarily into a person's hands 
to say, on his whim, kill the program, done with the program, based 
upon what he sees and what he says. That's why this bill, this 
amendment, must be defeated, and we recommend strongly a ``no'' vote on 
your amendment for that reason.
  The Acting CHAIRMAN. The Committee will rise informally.
  The SPEAKER pro tempore (Mr. Al Green of Texas) assumed the chair.

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