Support from the six senators was crucial, and their opposition deals a serious blow to the bill, according to a Bloomberg report. The legislation, written by Senate Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho), would replace Fannie and Freddie with a new federal mortgage insurer and move more risk onto the shoulders of private capital.
However, the six key senators – Elizabeth Warren (D-Mass.), Charles Shumer (D-N.Y.), Sherrod Brown (D-Ohio), Jeff Merkley (D-Oregon), Robert Menendez (D-N.J.) and Jack Reed (D-R.I.) – said the bill needed major revision, according to Bloomberg. They felt the structure of the new federal reinsurer was problematic and that the bill didn’t contain sufficient support for affordable housing goals. But changing the bill to address those issues could erode Republican support, Bloomberg reported.
That means federal mortgage reform is “effectively dead” until at least 2015, Isaac Boltansky, policy analyst for Compass Point Research and Trading, told Bloomberg.
“The Johnson-Crapo package will still likely clear the committee, but without any of the six targeted Democrats signing on it is highly doubtful that the measure will get a floor vote,” Boltansky said.
Sean Oblack, a spokesman for Johnson, said in a statement that the senator would continue trying to build support for the legislation.
“We have made significant progress bridging the divide among those previously undecided, and the committee vote is just a first step,” Oblack said. “Those involved in the negotiations have indicated they are interested in continuing to work together to try and find common ground, so the Banking Committee will keep working after favorably reporting out the bill next week.”
Six key Democrats have refused to support a bill that would wind down Fannie Mae and Freddie Mac, according to reports.