Chambliss On Financial Regulatory Reform

Just received the following statement from Senator Saxby Chambliss:

Chambliss Addresses Concerns with Financial Regulatory Reform Legislation

“To leave Freddie Mac and Fannie Mae out of any additional regulations is a mistake.”

WASHINGTON – U.S. Sen. Saxby Chambliss, R-Ga., addressed his concerns with the financial regulatory reform bill on the Senate floor today. The following are excerpts of his floor speech:

“…There are some provisions in the bill that I have particular objection to, and there are some things that are not in the bill that I think should be in the bill. For example, one of the major causes of the problem – and I think it goes without saying – is the fact that the GSE’s – Fannie Mae and Freddie Mac – have been authorized over the years to purchase mortgages from individuals who simply couldn’t make their payments, and those mortgages have been bundled up together and have been sold on the market and have been one of the root causes, in my opinion, of the problem.

“And I’m not alone in thinking that. Other individuals, but more importantly, people who know a lot more about the root cause of the problem than anybody in this body agree that that is a major issue that has to be addressed in any overall financial reform. And to leave any reference to Freddie Mac and Fannie Mae out of any additional regulation is a mistake. There are going to be amendments with respect to that, and I look forward to the debate on that.

“Another issue is that there are no mortgage standards that are specifically set forth in the underlying bill. I can remember very well going in and buying my first house, and making an application for a mortgage. Even though my payment was going to be fairly minimal to the amount of money I was making, I had to pay 20 percent down. It took me a couple of weeks to be approved by individuals in my hometown whom I knew very well. At the end of the day, they just wanted to make sure I was going to be able to pay that loan back. Not that we need to go all the way in that direction, but certainly we need standards in place that are going to ensure that people who are buying houses can afford to make the mortgage payments they are applying for.

“With respect to the Consumer Financial Protection Act, it appears that the underlying bill will require the inclusion of more non-problem areas of the consumer finance industry than are really in any way potentially a part of any future financial meltdown.

“So I hope that as we debate these amendments – and I know we’ll have a very spirited debate on them – we can come to some agreement as to what’s reasonable. Let’s do what we need to do to provide our regulatory agencies with the additional oversight they need to make sure that we put them in a position and give them the tools not to allow the situation that occurred in 2007, 2008, and 2009 to recur, but that we don’t go too far to where we overreach and exercise more control on the part of the regulators than what is absolutely necessary…”

To watch Sen. Chambliss’ speech in its entirety, click here.

5 comments

  1. ByteMe says:

    Not really blog-worthy… unless you’re going to point out that his premise is wrong, which it is. Wrong.

    Subprime was only a small part of why Fannie/Freddie were having trouble — they were nearly insolvent a couple of years before the subprime meltdown through sheer mismanagement and not because they “have been authorized over the years to purchase mortgages from individuals who simply couldn’t make their payments”.

    As for individuals not being able to make their mortgage payments, perhaps he can comment on how 10+% unemployment figures into people not being able to — or wanting to — afford a house that has a value less than the remaining mortgage amount.

    Saxby = Idiot.

    • btpull says:

      Actually Chambliss is correct. Quoting from Fannie Mae’s 2009 10K filing with the SEC:

      “Since 1993, we have been subject to housing goals, which have been set as a percentage of the total number of dwelling units underlying our total mortgage purchases, and have been intended to expand housing opportunities (1) for low- and moderate-income families, (2) in HUD-defined underserved areas, including central cities and rural areas, and (3) for low-income families in low-income areas and for very low-income families, which is referred to as “special affordable housing.”

      “Since 1995, we have also been required to meet a subgoal for multifamily special affordable housing that is expressed as a dollar amount. The 2008 Reform Act changed the structure of the housing goals and created a new duty for us and Freddie Mac to serve three underserved markets—manufactured housing, affordable housing preservation, and rural housing—beginning in 2010”

      “The potential penalties for failure to comply with housing plan requirements are a cease-and-desist order and civil money penalties. To the extent that we purchase higher risk loans to meet our housing goals, these purchases could contribute to future credit losses. ”

      In other words Fannie Mae is given targeted requirements for loans to low-income people. They must meet these targets even if it requires them to purchase high risk loans that will result in financial losses to the firm.

  2. ByteMe says:

    You’re projecting a 2009 SEC filing with statements about future possibilities into the past.

    Poor people did not cause the problems in the financial markets.

    #FAIL.

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