Blog
|
Posted by
on
January 06, 2014
Welcome back for the Second Session of the 113th Congress. The House convenes on Tuesday with votes scheduled through Friday this week. Here's what's happening: On Thursday at 10 a.m. the Monetary Policy & Trade Subcommittee continues our Federal Reserve Oversight Project with a hearing on the international impacts of the Fed's quantitative easing program. Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week.
Posted by
on
January 06, 2014
WSJ Editorial | January 5, 2014 The prospects for progress on Capitol Hill this year are few, but one possibility is reform of federal housing policy. With home prices rising and the economy growing, now is a good time to pare back the government support that has too often led to unsustainable housing booms and taxpayer busts. Consider the Obama Administration's latest report to Congress on the Federal Housing Administration. The Department of Housing and Urban Development noted last month that the FHA has a negative $1.3 billion net worth, and that's after a $1.7 billion Treasury capital infusion in September to offset losses. FHA insures more than $1 trillion in loans and has now missed its federally mandated 2% minimum capital standard for five years. This is hard to do amid a housing recovery, even for the government. FHA wasn't caught up in the subprime hurricane as Fannie Mae or Freddie Mac were in the pre-2007 boom years. Instead, FHA expanded its high-risk book of business right as everyone else was getting out. As HUD Secretary Shaun Donovan euphemistically put it, "the substantial role FHA was forced to play" to keep housing credit flowing during the bust inflicted "considerable stress." Uh huh. Delinquency rates on FHA's 2007, 2008 and 2009 books stand at 26%, 26% and 19%. Taxpayers will now have to pay for those homeowners who were induced in part by FHA subsidies to buy more home than they could afford. The Obama Administration's response to FHA's troubles has been to pile higher fees on new borrowers. Along with rising housing prices and the quiet shuttering of FHA's reverse-mortgage business, this has helped FHA's finances improve from awful to merely rotten, but it may not be enough to right the books soon. It's hard to know how deep the FHA's red ink goes. The agency's fiscal health is an estimate based on 30-year forecasts of mortgage prepayment rates, unemployment rates, house prices and inflation rates that no private insurer would use. Do you know what unemployment will be in 2044? Even the actuaries disagree on the scope of the problem. FHA's go-to firm, Integrated Financial Engineering Inc., thinks the agency's single-family home insurance program is worth negative $7.9 billion but could make money by the end of the fiscal year. Summit Consulting and Milliman Inc., more conservative outfits, think the right number is negative $10.6 billion and the business will remain in the red next year, adding that forecasts are "subject to significant variability." Whatever the real number, the main goal should be not to repeat the mistake. The underlying problem is that the FHA's woes derive from a policy of public risk and private profit, which is what blew up Fannie Mae and Freddie Mac. In a better world, Congress would slowly work off the FHA's portfolio and get out of the housing subsidy business. Short of that, Texas Republican Jeb Hensarling has a proposal to spin off FHA from the Department of Housing and Urban Development, make it a stand-alone agency, focus its mission on low-income and first-time home buyers, and subject it to the same accounting rules that private lenders have to meet. How about starting there?
Posted by
on
December 17, 2013
Earlier this month Chairman Hensarling and Monetary Policy and Trade Subcommittee Chairman Campbell announced the committee's “Federal Reserve Centennial Oversight Project” – an aggressive series of hearings slated during 2014 that will culminate in the markup of legislation to reform how the nation’s central bank operates. The Oversight Project coincides with the 100th anniversary of the Fed’s creation later this month, as well as the expected Senate confirmation of a new Federal Reserve chairman. “The Federal Reserve Centennial Oversight Project will be the most vigorous and sustained assessment and evaluation the Fed has received in its history,” Chairman Hensarling said. “Our committee has an obligation to carefully scrutinize the Federal Reserve’s decisions, especially since the Fed has either implicitly or explicitly assumed so many mandates and has, historically, been subject to little or no congressional oversight.”Here's what they're saying after the first full committee hearing on the oversight project: Fox Business | Will the Fed’s 101st year be its most challenging? The Hill | GOP begins ‘rigorous’ review of the Fed
POLITICO Pro | House GOP announces plan to examine Fed
Bloomberg | Fed’s $4 Trillion in Assets Draw Lawmakers’ Scrutiny
Bloomberg | Fed to Come Under ‘Rigorous’ House Scrutiny, Hensarling Says
Posted by
on
December 15, 2013
Posted by
on
December 09, 2013
The House is in session Monday through Friday this week -- the last week of session and committee activity currently scheduled for 2013. Here's what's happening: On Thursday at 9:30 a.m., Treasury Secretary Jack Lew will testify on the state of the international finance system. The full committee will then meet again at 2 p.m. to rethink the Federal Reserve's many mandates on its 100-year anniversary. Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week.
Posted by
on
December 08, 2013
Congressman Robert Hurt (Twitter | Facebook) delivers this week's Sunday Video Message on H.R. 1105, the Small Business Capital Access & Job Preservation Act. H.R. 1105 passed the House with strong bipartisan support last week.
Posted by
on
December 05, 2013
Since 1893, Owingsville Banking Company (OBC) has served the citizens of rural Bath County Kentucky. The bank endured the Great Depression, the stagflation of the 1970s and, most recently, the Great Recession. Today, however, OBC faces a new challenge -- not the difficult market conditions of this tepid economic recovery, but an avalanche of Washington regulations. In the above video (at the 4:50 mark), fifth generation banker Thomas Richards testified that the "frightening" regulatory environment created by Dodd-Frank and enforced by the Consumer Financial Protection Bureau (CFPB) could wipe OBC out of existence in ten years. Unfortunately, Owingsville Banking Company isn't alone. Accelerated by the aggressive regulatory onslaught of the Dodd-Frank Act, small community financial institutions across the country are disappearing at an alarming rate while big banks grow even bigger. The Wall Street Journal reported earlier this week that the "number of federally insured institutions nationwide shrank to 6,891 in the third quarter after this summer falling below 7,000 for the first time since federal regulators began keeping track in 1934, according to the Federal Deposit Insurance Corp." That decline, according to the WSJ, comes "entirely in the form of exits by banks with less than $100 million in assets." Part of this problem stems from the inability of Washington elites to understand the characteristics and unique needs of local communities across America. Consider, for example, an area like Bath County Kentucky -- a county of two stoplights and a large Amish population. No reasonable person would classify this county as anything other than rural. In fact, Charles Vice, the top-banking regulator in Kentucky, testified that Bath County is one of the most rural places in the Commonwealth. To the CFPB, however, the above map of Owingsville in Bath County could look just as much like a sprawling urban metropolis as it does a rural county seat surrounded by forests and fields. Relying on the “Urban Influence Codes” developed by the Department of Agriculture’s Economic Research Service, which are, in turn, derived from the definitions of “metropolitan” and “micropolitan” developed by the Office of Management and Budget (OMB), the CFPB does not classify Bath County as rural for the purpose of exempting it from Dodd-Frank's Qualified Mortgage rules. Such a misguided classification could leave many in Bath County without access to affordable credit. That's why the Financial Institutions and Consumer Credit Subcommittee held a hearing on Wednesday focused on legislation introduced by Rep. Andy Barr that would provide relief to financial institutions in rural areas like Bath County, Kentucky. "H.R. 2672 is a simple, pragmatic, and bipartisan solution this problem," said Rep. Barr. "It’s about inviting individuals to participate in their government and provide input on matters of local knowledge. It’s about making the federal government more accessible, more accountable, and more responsive to the people who know their communities best, so we can help create jobs in our local communities."
Posted by
on
December 03, 2013
The Problem: Excessive and unnecessary regulations hurt our economy, increase costs and restrict access to private sector capital that our nation’s job creators need to grow the economy and create jobs. The Example: Title IV of the Dodd-Frank Act imposes new registration and reporting requirements on hedge funds and private equity firms. Specifically, Title IV requires investment advisers to private investment funds to register with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940. As a result of Title IV’s registration requirements, advisers to private funds must maintain records and file reports with the SEC, which are made available to other regulators, including the Financial Stability Oversight Council (FSOC). Requiring all advisers to private funds to maintain records and file reports with the SEC does little to improve the SEC’s ability to meet its mission, while weighing it down with unnecessary tasks and stifling rather than promoting capital formation. The Bottom Line: The Dodd-Frank Act was not written in stone or handed down from Mount Sinai, and Congress has an obligation to amend or repeal those provisions that did not cause or contribute to the financial crisis and whose costs outweigh their purported benefits. The Solution: The bipartisan H.R. 1105 – which the Financial Services Committee reported by a 38-18 (.pdf) vote on June 19, 2013, would exempt advisers to certain private equity funds from the new registration requirements imposed by Title IV of the Dodd-Frank Act. H.R. 1105 would exempt from SEC registration advisers to private equity funds that have not borrowed and that do not have outstanding a principal amount in excess of twice their funded capital commitments.
Posted by
on
December 02, 2013
The House is in session Monday through Thursday this week and will consider one Financial Services Committee bill. Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week. Here's whats happening: On Wednesday at 10 a.m. the Financial Institutions and Consumer Credit Subcommittee will hold a legislative hearing on regulatory relief bills in 2128 Rayburn. And on Wednesday afternoon, the House will consider H.R. 1105, the Small Business Capital Access and Job Preservation Act.
Posted by
on
November 27, 2013
Chairman Hensarling Op-Ed | November 27, 2013 Persistently weak job growth, higher taxes on families and record-breaking government debt are the hallmarks of the failed economic experiment known as Obamanomics. It is an experiment made up of many policies, but its core revolves around one central belief: A larger, more powerful, more intrusive government can and should fix every problem. The fact that you can no longer keep your health insurance, even if you like it, is yet more proof that government today has more control over our lives than ever. Perhaps nowhere is the presence of government more intrusive and dominant than in housing. Government has maintained an oversized role in housing, based largely on the noble — but ultimately unsound — proposition that everyone should be encouraged to own a home. Tragically, a federal government that lives well beyond its means also encourages Americans to do the same. What has been the effect of government housing policy? A dizzying cycle of booms and busts, first regionally in places such as California, New England and the western "oil patch" states, culminating finally in the massive national housing bubble that gave way to the financial crisis. That crisis should have shown the wealth-destruction and significant social costs of exaggerated government intervention in housing. Yet instead of pursuing meaningful reforms, President Obama used the crisis to create a virtual government monopoly of the housing finance system. At the heart of this monopoly are taxpayer-backed entities like Fannie Mae, Freddie Mac and the Federal Housing Administration, which now guarantee nine of every 10 new mortgages. This puts hardworking taxpayers on the hook for more than $6 trillion in mortgage guarantees, more than one-third the size of our entire economy. The unfortunate irony here is that the very institutions the administration is relying upon to prop up our housing system are themselves already broken, broke and bailed out. Fannie and Freddie infamously received the biggest taxpayer-funded bailout in history: nearly $200 billion. Now there is a crisis at the Federal Housing Administration, which in good times is used to partially finance the operations of the Department of Housing and Urban Development. A New Deal creation designed to help first-time homebuyers and those with low and moderate incomes to buy homes, the Federal Housing Administration has experienced extreme mission creep since the start of the crisis. It now insures loans on homes valued as high as $729,750 — far beyond the reach of those with truly low or moderate incomes — and controls nearly 60 percent of the mortgage-insurance market, nearly twice its pre-crisis level. This untenable expansion finally caught up with the Federal Housing Administration in September when it became the latest recipient of a taxpayer bailout. The agency's $1.7 billion bailout — the first in its history — equals roughly 10 percent of its annual receipts. To make matters even worse, the agency bailout took place without a vote of Congress. The Federal Housing Administration has a permanent and unlimited direct line to the U.S. Treasury, so taxpayers could be writing blank checks for its bailout indefinitely. Every penny gets added on top of our already staggering $17 trillion national debt. The bailout occurred despite years of assurances from the Obama administration that "all was well" at the agency. Administration officials repeatedly disregarded warning signs of its deteriorating condition, such as last year's actuarial report that revealed the agency's mutual mortgage insurance fund has a negative economic value of $16.3 billion. In fact, every year since 2008, the agency has been in violation of federal law for failing to maintain reserves equal to 2 percent of the current value of its guarantees. The Federal Housing Administration's financial decline has been hastened by employing many of the castigated practices of subprime lenders such as small down payments, low credit scores and cheap upfront pricing. As a result, families become trapped in homes they ultimately cannot afford to keep. One in eight agency loans ends in default or foreclosure. The agency has also refused to make full use of the tools it has at its disposal, such as raising premiums to their maximum or increasing minimum down payments. Commissioner Carol Galante testified recently before Congress that such increases would upset the "balance between strengthening the fund [and] making the cost of credit prohibitive for qualified homebuyers." However, such arguments miss the fundamental point that a bankrupt Federal Housing Administration helps no one. Clearly, the Obamanomics approach of more government to fix our housing problems is not working, nor is it sustainable. That's why Republicans on the House Financial Services Committee, of which I am chairman, have offered a new vision for a sustainable housing system for America called the Protecting American Taxpayers and Homeowners Act. The Path Act is designed to reduce the government's domination of housing and right-size the agency's market share. Specifically, the Path Act reforms the agency by returning its focus to its historic role of helping first-time, and low- and moderate-income homebuyers. It also gives the agency a clear countercyclical role to assist borrowers in times of significant credit contraction. The Path Act removes the Federal Housing Administration from the Department of Housing and Urban Development, establishing it as a separate, self-sufficient agency. It requires the agency to charge minimum annual premiums, limit taxpayer exposure by properly adjusting the agency's maximum insurable loan limit, and maintain a strict 4 percent minimum capital reserve ratio. The reforms enacted in the Path Act will create a sustainable housing-finance system and end the ruinous cycle of Washington's failed boom-bust-bailout housing schemes once and for all. Americans deserve and demand a healthy economy. We cannot borrow, spend or bail out our way to prosperity. President Reagan said, "As government grows, liberty contracts." That applies to our economy as well. If government continues to dominate the housing market, we may never have a truly healthy and sustainable economy. |
