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Th e M Rep o RT | 59 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t SECONDARY MARKET the latest Privatization Bill for Fannie and Freddie Passes the House Both sides do—and don't—want the bill to pass the Senate. d espite some recent pushback from Sen- ate Democrats, the Johnson-Crapo reform bill, which plans to phase out Fannie Mae and Freddie Mac, passed the Senate Banking Com- mittee by a bipartisan vote of 13–9. The legislation is an agree- ment between Chairman Tim Johnson (D-South Dakota) and Ranking Member Mike Crapo (R-Idaho) "designed to stabilize the housing finance market and strengthen the American economy," the committee said in a press release. "After the housing crisis we experienced, real reform is clearly necessary to stabilize the housing system and renew the faith in the American dream of homeownership for generations to come," Johnson said. "Even though the support was not unanimous, every member on the Committee was actively engaged in this collaborative process, and passing this legislation out of committee is only the first step." The bill would get rid of both Fannie Mae and Freddie Mac in their current form, allowing pri- vate companies to enter the space vacated by the two companies. Currently under the conservator- ship of the federal government, the companies can't be relin- quished from federal control with- out an act of Congress or their regulator, the Federal Housing Finance Agency (FHFA). The bill would create a re- insurance fund, known as the Mortgage Insurance Fund, to pro- tect taxpayers. The new system would be regulated by the Federal Mortgage Insurance Corporation, which would function similarly to the FDIC. "Today's vote marks an impor- tant milestone. For the first time in the nearly six-year conservator- ship of Fannie Mae and Freddie Mac, both bodies of Congress have passed legislation to reform our broken housing finance system. I thank everyone for their continued work on this legislation and look forward to further dis- cussions as the process continues," Crapo said. The White House lauded the committee for its work, calling last month's vote "an important step toward achieving a more sus- tainable housing finance system that helps protect the American dream of homeownership." However, many viewed today's vote as neither a win nor even a positive long-term outcome for the American people. An outspoken critic of the bill, House Financial Services Committee Chairman Jeb Hensarling (R-Texas), believes the bill is nothing more than a wealth redistribution scheme: "[T]he Senate bill features a con- troversial and irresponsible new politicization of mortgage credit insisted by Senate Democrats under the guise of affordable housing. This wealth redistribu- tion scheme, far worse than that of the current system, would be a multi-billion dollar annual invitation to return to the lower credit standards, higher risks, and unsustainable lending that created the crisis in the first place." Democrats also found problems with the bill, albeit for different reasons. "I remain concerned that this bill in its current form does not do enough to produce a hous- ing market that works for middle- class America," said Sen. Elizabeth Warren (D-Massachusetts), who voted against the bill. Nevertheless, the bill now heads to the Senate, where it is expected to face an uphill battle gaining support for a floor vote. The Johnson-Crapo reform bill, which plans to phase out Fannie Mae and Freddie Mac, passed the Senate Banking Committee by a bipartisan vote of 13–9.