On September 15, the Senate unanimously passed
a bill co-authored by Senators David Vitter (R-LA) and Elizabeth Warren (D-MA)
that would effectively block recent executive pay increases at the Government-Sponsored
Enterprises (GSEs), Fannie Mae and Freddie Mac. The raises were proposed by Federal
Housing Finance Agency Director Mel Watt this summer. This immediately raised
eyebrows in Washington because the pay increases only applied to the GSEs Chief
The Obama administration publicly opposed the raises. Then, a bill quickly moved through the House Financial Services Committee to block the raises prior to the August recess. With the Senate also now acting on the issue, it is likely a bill will reach the President’s desk this fall.
Having taken this first action on the GSEs in the 114th Congress, the possibility of additional legislation might be trending up. Specifically, Senators Bob Corker (R-TN), David Vitter (R-LA), Mark Warner (D-VA), and Elizabeth Warren (D-MA) reintroduced the Jumpstart GSE Reform Act on September 16. That’s just one day after the GSE executive compensation bill successfully navigated the Senate chamber.
The reform bill prohibits guarantee fees from Fannie and Freddie be used to offset other Federal Government spending. This is presumably an effort to avoid a similar action taken in 2011 in the upcoming negotiation over government funding and/or the highway trust fund bill.
In addition, the Jumpstart GSE Reform Act prevents the Treasury Department from selling preferred shares of the GSEs back into the private market - similar to the AIG rescue and disposition without the approval of Congress. The bill, and particularly the guarantee fee provision, is likely to get a lot of attention this fall with contentious funding debates looming on a number of issues.
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