(Bloomberg)—The White House proposal to free Fannie Mae and Freddie Mac from U.S. control can’t advance in Congress until lawmakers are given more details and assurances that everyone in the Trump administration is fully on board, according to a key House member.
Representative Blaine Luetkemeyer, a Missouri Republican who sits on the Financial Services Committee, said in an interview that it’s unclear whether the Treasury Department and others on President Donald Trump’s team support the plan released last week that would end federal conservatorship of the two mortgage-finance giants and expose them to new competitors.
“I would like to see the Treasury secretary endorse that plan,” said Luetkemeyer, who is a top contender to succeed Jeb Hensarling as chairman of the House panel that oversees the financial services industry. “My understanding is that there is still some discussion in the administration with regards to how that plan is going to play out.”
In response to a request for comment, a Treasury Department spokesperson said Secretary Steven Mnuchin “is very focused on housing reform and anticipates it will be a priority in the next Congress.”
Mulvaney Plan
The Fannie-Freddie proposal was included in a sweeping government reorganization plan crafted by Mick Mulvaney, the former House member who leads the White House budget office. It calls on Congress to scrap the federal charters for the two companies and have them and their rivals be overseen by a government entity with power to approve guarantors and change regulations.
Luetkemeyer said that he would make housing-finance reform a priority if he were to become Financial Services Committee chairman, but that before Congress can take up any legislation, he wants more guidance from the administration. He suggested that even the question of whether to release Fannie and Freddie remains up in the air.
“This is a really thorny issue,” he said. “The administration needs to take the lead, period. They need to set down the structure of how they want this to fall out.”
Fannie and Freddie have been under U.S. control since 2008, when regulators took them over during the financial crisis and eventually injected them with $187.5 billion in bailout money. While the two companies have returned to profitability, some lawmakers and other policy makers have said they should be shuttered and replaced with a system that doesn’t leave taxpayers on the hook for losses.
Midterm Elections
Even though the midterm elections are still months away, lawmakers including Luetkemeyer have been jockeying for months for a shot at the gavel to run the Financial Services Committee, which drafts rules that govern Wall Street firms and oversees the agencies that regulate them. With Hensarling’s term ending as he retires from Congress, the position will be up for grabs in January for the first time in six years. As committee vice chairman, Representative Patrick McHenry of North Carolina would be the GOP front-runner, but he is expected to seek a House leadership position -- opening the door for others to compete for the committee job.
If Democrats wrest control of the House, Representative Maxine Waters of California is in line to run the committee. That prospect should concern Wall Street, Luetkemeyer said.
“She is going to be adversarial, I think, to the financial services industry and, I think, to consumers and business” he said.
Tricky Process
Selecting the next chairman can be a lengthy and tricky process. It won’t happen until after the mid-term elections, when members of whichever party holds a majority form a committee to make their choice. Fundraising plays a big role in deciding who will be in charge, as committee chairmen are expected to raise campaign money for themselves and their colleagues.
Because the financial services industry is the primary provider of cash, its is widely viewed as having outsize influence over the committee. But Luetkemeyer demurs, saying raising money isn’t the only edge a prospective chairman can have.
“That’s one box that needs to be checked, but there’s a whole lot of other boxes that need to be checked,” he said. “I don’t think that the industry determines the next chairman.”
--With assistance from Joe Light.To contact the reporter on this story: Elizabeth Dexheimer in Washington at [email protected] To contact the editors responsible for this story: Gregory Mott at [email protected] John Harney
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