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- Whistleblowers A whistleblower is any individual providing the SEC with original information related to a possible violation of federal securities law. The Dodd-Frank Act established a whistleblower program that enables the SEC to reward individuals who voluntarily provide such information.
- Pay-to-Play Rule Violating the pay-to-play rule can result in serious consequences, and RIAs should adopt robust policies and procedures to prevent and detect contributions made to influence the selection of the firm by a government entity.
Members of the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises (GSEs) unveiled their plan on Tuesday to introduce eight bills over the next few months that will “wind down” Fannie Mae and Freddie Mac.
Rep. Scott Garrett, R-N.J., chairman of the Committee, said in a statement that “today marks a process” in which Committee members will “introduce multiple rounds of very specific, very targeted bills to end the bailouts, protect the taxpayers and get private capital off the sidelines.” The culmination of the Committee’s efforts, he continued, “will formally wind down the GSEs and return our housing finance system to the private marketplace.”
With American taxpayers “on the hook for $150 billion and counting,” Garrett (right) said, “the bailout of Fannie and Freddie is already the most expensive component of the federal government’s intervention into the financial system. Americans are tired of the ongoing bailout of the failed government-backed mortgage giants, and they are tired of Democrats’ refusals to address the driving force behind the financial collapse.”
The Capital Markets Subcommittee plans to hold a hearing on the eight bills on Thursday, with a markup scheduled for Tuesday, April 5th.
The eight bills are as follows:
The Equity in Government Compensation Act, sponsored by House Financial Services Committee Chairman Rep. Spencer Bachus (left), R-Ala. Bachus’ legislation would establish a compensation system for employees of Fannie Mae and Freddie Mac that is consistent with other federal government employees. Says Bachus: “Now that Fannie and Freddie are owned by the government, there is no reason that employees of Fannie and Freddie should not be paid like government employees. In addition, the bill expresses the sense of the Congress that the 2010 pay packages for Fannie and Freddie senior executives were excessive and that the money should be returned to taxpayers.”
The GSE Mission Improvement Act, sponsored by Rep. Ed Royce, R-Calif., would permanently abolish the affordable housing goals of Fannie Mae and Freddie Mac. Royce says that his “bill permanently abolishes the GSEs’ affordable housing goals, which were a central cause behind the collapse of the GSEs. The ongoing goal of the GSEs should be to reduce risk to taxpayers, not expose them to further losses.” The bill eliminates “these requirements and ending the mandate that Fannie and Freddie buy riskier loans in the name of affordable housing in the United States, the bill will protect American taxpayers going forward.”
The Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act, introduced by Rep. Judy Biggert, R-Ill., chairman of the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity. As described by the Subcommittee: Biggert’s bill ramps up oversight of Fannie Mae
and Freddie Mac by establishing in statute an Inspector General (IG) within FHFA and providing the IG with additional law enforcement and personnel-hiring authority. The bill also requires the GSE Inspector General to submit regular reports to Congress outlining taxpayer liabilities, investment decisions, and management details of Fannie and Freddie. Finally, the bill requires that these reports, along with a system to report waste, fraud, or abuse, be made publicly available.
The GSE Subsidy Elimination Act, sponsored by Rep. Randy Neugebauer, R-Texas, Chairman of the House Financial Services Subcommittee on Oversight, would direct the Federal Housing Finance Agency (FHFA) to increase the guarantee fees (g-fees).“Slowly raising the guarantee fee of Fannie and Freddie to eliminate their imbedded subsidies will finally bring pricing parity between the private market and the GSEs,” said Neugebauer, in a statement. Neugebauer’s bill directs the FHFA to phase in an increase of the g-fees over two years so Fannie Mae and Freddie Mac price their guarantees as if they were held to the same capital standards as private banks or financial institutions.
GSE Portfolio Reduction Act, sponsored by Rep. Jeb Hensarling, R-Texas, Vice Chairman of the House Financial Services Committee, would cap the current portfolios of Fannie Mae and Freddie Mac and increase their annual attrition rate. Hensarling’s bill accelerates and formalizes the reductions in the size of the GSEs’ portfolios by setting annual limits on the maximum size of each GSE’s retained portfolio and ratcheting the limits down over five years until they have reached a sustainable level. In the first year, the GSEs would have their portfolios capped at no more than $700 billion, declining to $600 billion for year two, $475 billion for year three, $350 billion for year four, and finally $250 billion in year five.
GSE Risk and Activities Limitation Act, sponsored by Rep. David Schweikert, R-Ariz., Vice Chairman of the Capital Markets Subcommittee would prohibit Fannie Mae and Freddie Mac from engaging in any new activities or businesses. Currently, Schweikert said, “FHFA is preventing the entities from engaging in new activities, and we want to ensure that stays that way by codifying that current practice. That will prevent taxpayers from taking on additional risk and allowing the GSEs to spread into other areas.”
The GSE Debt Issuance Approval Act, sponsored by Rep. Steve Pearce, R-New Mexico, would require formal approval by the Department of Treasury for any new debt issuance by the GSEs. Pearce’s bill requires the Department of Treasury to formally sign off on any new debt issuance by the GSEs. Pearce says this bill “will help protect taxpayers by requiring the formal legal authority of U.S. debt issuance to approve the issuing of agency debt, which is roughly the same as U.S. debt.”
GSE Credit Risk Equitable Treatment Act, sponsored by Garrett, would prohibit the exemption of GSE securities from the risk-retention requirements of Dodd-Frank. “To get more private capital flowing in our mortgage market, we have to make certain that government policies do not continue to crowd out the private sector,” said Garrett. “This bill will ensure that the GSEs are not exempt from new risk-retention rules mandated by Dodd-Frank and that they face the same retention standards as private market participants.”