U.S. Financial Markets Do Not Need a New Regulator: Senate Misses the Mark
Senators Tim Johnson (D-SD) and Mike Crapo (R-ID) have released a new housing finance reform bill, and as expected, it is very similar to the bill that Senators Bob Corker (R-TN) and Mark Warner (D-VA) released last June. Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and both would replace the GSEs with a new government agency. This new agency, the Federal Mortgage Insurance Corporation (FMIC), receives an even bigger regulatory role in the Johnson-Crapo bill than it would have under the Corker-Warner plan. The Senate’s newest legislation even gives the FMIC the authority to waive the much-touted first-loss provision when approving new companies to operate in the mortgage market. The Senate bills would not help people to buy homes; they would only protect investors and special interests at taxpayers’ expense.