ABA Banking Journal - January 2011 - (Page 28)
feature story | washington outlook
new Congress heads towards Fannie and Freddie debate and Dodd-Frank oversight. aBa’s senior gR team sets the stage By Steve Cocheo, executive editor
the next round:
he Dodd-Frank Act goes down as the least popular banking legislation in decades among bankers. How will bankers feel about the sequels? “Sequels”? ABA’s top legislative strategists believe that a key post-crisis set of issues, not dealt with in Dodd-Frank— the future of Fannie Mae and Freddie Mac, and the shape and character of U.S. housing finance in years ahead—will be addressed not in a single piece of legislation, but several. While that goes on, the banking lobby will be working in both the legislative and regulatory branches on DoddFrank’s implementation, and oversight of same. All this will occur against a backdrop of a House now under Republican control, a Senate with new key leaders and a higher percentage of Republicans (see companion article, p. 30), and with a significant new regulator: the Consumer Financial Protection Bureau. Mortgage reform to the fore “The Dodd-Frank Act affects everything you can imagine, but the impetus for much of it was the mortgage lending crisis,” says ABA’s Bob Davis. “More of DoddFrank deals with mortgage lending than anything else. The regulators have more rules and regulations pending in the mortgage area than any other, and it will be the primary focus of the consumer bureau as well.” Davis is ABA executive vice-president for mortgage finance, risk management, and public policy. Floyd Stoner, ABA executive vice-president for congressional relations, says that some members of Congress thought the issue of the future of Fannie and Freddie should have been part of Dodd-Frank. New House Financial Services Committee Chairman Spencer Bachus (R.-Ala.) was among them. But the issue was split from the main debate along the way. “Politically, the role of Fannie Mae and Freddie Mac
is not as high today, but it is still very, very big,” says Stoner. “People in Congress have strong views about what to do. And none of that is going away, even though the sense of crisis may have diminished.” While urgency remains, ABA’s experts, interviewed in late December, see a change of tone. “As Dodd-Frank evolved, bankers recognized that there were elements of the law that are killers,” says Wayne Abernathy, executive vice-president, financial institutions policy and regulatory affairs. “That’s still the case and if they aren’t changed they will kill a large number of banks over time. That’s what made the Dodd-Frank discussions so bitter.” Abernathy says there’s been a thawing between ABA and the Obama Administration and the Treasury Department. “There’s been a clear effort to reach out more to the banking industry,” Abernathy explains. “This is a dialog we wished we could have had over the course of the last year. Then, it was episodic, at best. But this seems like a determined effort to engage.” Says Abernathy: “That’s positive for our industry and our customers.” no speedy, easy resolution Fannie and Freddie entered conservatorship in September 2008. Their future is intimately tied up with many diverse issues. These include the future roles of the public and private sector in home lending; the government’s role in guaranteeing mortgage investments; the funding of mortgage borrowing and the roles of on-balancesheet and off-balance-sheet lenders; the role of banks as investors in mortgage securities; and the competitive positions of large and small depository institutions as the mortgage and deposit markets eventually return to some degree of normality. In other words, a huge Gordian knot. “It’s very difficult to imagine a sweeping single bill
28 | ABA BANKING JOURNAL | january 2011
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