16th District Congressman Don Manzullo has sent out a press release about what he said about changing financial regulations to better protect the public:
Manzullo Offers Proposals to Tighten Financial Regulations, Strengthen American Economy
[WASHINGTON] Congressman Don Manzullo (R-Egan) today spoke at a House Financial Services Committee hearing and offered several suggestions to tighten financial regulations and improve the American economy.
Manzullo, a member of the committee, co-sponsored three Fannie Mae and Freddie Mac reform bills in 2000, 2003, and 2005 and questioned the unethical activities of the government-sponsored enterprises at hearings in 2000 and 2004, yet nothing was done to rein-in the lax underwriting standards and purchasing policies of the mortgage giants.
Fannie and Freddie’s reckless acquisition of loans made by lenders to people regardless of their ability to repay incentivized lenders to lower their credit standards to make riskier loans – the very mortgages that failed and sparked our current financial crisis, Manzullo said.
“The unchecked fraud and abuse at these institutions is staggering and has cost the taxpayers millions,” Manzullo said. “This is a clear indication that Fannie and Freddie should undergo significant reform and that their role in the housing market should be seriously reconsidered.”
During Tuesday’s hearing, Manzullo offered the following reforms he co-sponsored as part of HR 7223:
· Limit Federal Backing for High Risk Loans: We need to mandate that Government Sponsored Enterprises [GSEs]no longer securitize any unsound mortgage that is:
(1) not fully documented to meet minimum requirements for work, assets, and income;
(2) written to comply with any law or regulation that would otherwise violate a firm’s lending rules.
· Schedule the GSEs (Fannie Mae and Freddie Mac) for Privatization: We must transition Fannie and Freddie over a reasonable time period to truly private companies without special government privileges and open them up to real market competition. This reform would:
1)establish commonsense limits for their capital requirements and portfolio holdings relative their size;
2)focus their mission on affordable housing only, not profit making;
3)require them to pay an appropriate risk-based amount for the government guarantee they enjoy;
4)subject them to state and local taxes and accurate SEC filings like every other private for-profit corporation; and
5)ultimately provide for the phase out their GSE charters once their conservatorship has ended.
· Suspend “Mark to Market” Accounting: We should direct the SEC to suspend the mark-to-market regulatory rules until the agency can issue new guidelines that will allow firms to mark these assets to their true economic value. The current rules contribute to a downward spiral as firms have to evaluate their assets not on the basis of their long-term investment but rather on a short-term mania.
· Strict Enforcement of Laws Designed to Protect Investors: Congress must task the SEC with reviewing the annual audit reports of entities the federal government has brought under conservatorship or now owns, and determine if those annual audit reports from years 2005 to present accurately reflected the financial health of those businesses.
· Encourage the Federal Reserve to Expedite its Final Rule Requiring Proof of Affordability: The Fed has issued a common-sense rule that would require people to show proof that they could afford a mortgage before they receive it. Right now, this rule will not take effect until 2009. Given the state of our economy, this is unreasonable, and we should encourage its expedited publishing.