6.21.00
Rep. Richard Baker

6.20.00
Pat Choate on the Reform Party

6.20.00
Law Professor Richard Epstein

6.19.00
Sekulow on the Supremes & Prayer

6.19.00
Nicholas Eberstadt on Koreas Summit

6.15.00
William Tucker on Wilding

6.07.00
C. Boyden Gray on Microsoft

6.06.00
Donal Rumsfeld Says

6.01.00
Spencer Eig Says

6.01.00
James Carville On Bob Casey

5.31.00
Murray Sabrin On NJ's Senate Race

5.25.00
John Zogby On Hillary & Lazio

5.24.00
Lucianne Goldberg on Linda Tripp

5.23.00
Matt Glavin on Clinton's Disbarment

6/21/00 11:35 p.m.
Rep. Richard Baker
Any downturn in [Fanny Mae's] financial prospects would be disastrous for the U.S. economy.

By Kathryn Jean Lopez, NR associate editor------------lopezk@nationalreview.com

ep. Richard H. Baker, a Republican from Louisiana, is chairman of the House Banking Subcommittee in Capital Markets, Securities, and Government-Sponsored Enterprises (GSE's). He is author of H.R. 3793, a bill that would tighten regulation of Fannie Mae and Freddie Mac and would cut off their lines of credit to the U.S. Treasury.

Lopez: So why Fannie Mae and Freddie Mac now?

Rep. Baker: Over the years I have had the responsibility as the principle regular of GSE's in Congress, chairing the subcommittee on capital markets, which has direct jurisdiction on responsibility. But I have been involved in GSE issues for over a decade. And my concerns have grown as the enterprises have expanded their business scope and changed business practice. For example, today Fannie holds a significant percentage of mortgage-backed securities than ever before. Today, financial institutions hold record amounts of GSE securities for capital purposes. For example, there are over 4,000 financial institutions in the country today that have between 100 and 500 percent of their capital in GSE securities. What that translates into is a concern that if one of the housing GSE's were to stumble, the economic consequences of that would be far greater than mere losses to holders of GSE stock. It would perhaps put in jeopardy our Federal Deposit Insurance system as well.

Lopez: Some have said that what is looming is a crisis of Savings and Loans bailout proportions. Is that an accurate characterization?

Rep. Baker: It would be a rather small comparison, frankly, of the scope of impact of a failure of a GSE. They will surpass the U.S. Treasury in a year or two in the amount of debt issued. As I indicated, there are huge numbers of financial institutions which hold their securities for capital purposes; there are even in excess of 30 foreign central banks that have significant investment in these securities. They have made it their goal to become the new benchmark security to replace security issues as Congress pays off our national debt. So because of their broad involvement in international and domestic markets, any downturn in their financial prospects would be disastrous for the U.S. economy.

Lopez: Do you have the likes of Housing and Urban Development Secretary Andrew Cuomo and the Clinton Treasury department as your allies with this legislation?

Rep. Baker: They certainly have expressed concerns about the GSE's mission compliance arena. The undersecretary of the Treasury, Garry Gensler, testified before my committee on the safety and soundness aspects, so I can honestly say that the respective administration officials — and may I underline, Democrat administration officials — the safety and soundness person and the mission regulator both have agreed with various aspects of 3703 in supporting a Republican proposal to tighten regulation.

Lopez: When do you hope this will come up for a vote?

Rep. Baker: I intend to conduct as many hearings as subcommittee members need to have in order to fully understand and be comfortable with the issue. It would be my intention to vote in the subcommittee before this session of Congress adjourns, probably after the August recess.

Lopez: Isn't this a really unpopular crusade — especially to be taking on during an election year?

Rep. Baker: Well, it's not one I'd recommend to anyone who doesn't really believe it. It's not been particularly comfortable. It's not something you do to enhance your political relationships. But it's extraordinarily important public policy. And I think in the long term will even come to be beneficial to the GSEs.

Lopez: Isn't this the type of issue that can morph into Republicans taking lunches from hungry schoolchildren — depriving middle class families of home mortgage loans? How do you overcome that?

Rep. Baker: Well, in the last nine months, Federal Reserve chairman Alan Greenspan — from June of '99 to the current day — has raised interest rates directly one and three quarter points. I have not heard any GSE advocate exclaim that Alan Greenspan is irresponsible, unprofessional, or uncaring about the issue of home ownership. At the same time, we have discussed HR 3703 — from the date of its introduction through the last hearing — according to Freddie Mac's own Internet postings of interest rates on Thursdays, interest rates have actually dropped 20 basis points. So, my view is that this discussion is very important for long-term stability of the mortgage markets and that there are many factors which will effect calculations of interest rates of homeowners. Clearly, Alan Greenspan has a far greater impact on that rate than anything Congress might do collectively. So, I'm not at all concerned that our work will in any adverse way effect home ownership. In fact, it will ensure that the secondary market that we've all benefited from over the last decade remains stable and solvent into the next generation.

Lopez: Fannie Mae president Franklin Raines is on some of the longer lists of potential running mates for Al Gore. Could this become an issue in the presidential race?

Rep. Baker: Not at this point. It perhaps may after the elections are over, if President Bush is going to look to leaders in Congress for areas of reform. I'm hopeful to be one of the people with whom he can visit and talk to about this issue. Certainly it's an issue that I don't intend to let go of. I think it's far too important to simply turn our back on — not only from the standpoint of protecting taxpayers' interests, but from the standpoint of ensuring that the enterprises actually do what their governmental charters says they're to do, and that is to make credit available to minorities and low-income individuals. And they frankly don't do that good a job at it.

Lopez: Do you hope to be Banking Committee chairman in the next session?

Rep. Baker: Well, I think that every member of a congressional committee hopes to be chairman of the committee at some point. Whether it's this session or another, I'm a patient fella. I enjoy my work on the committee and would welcome the opportunity, should it become available.

Columns / Current Issue / Goldberg File / Nota Bene
Washington Bulletin / Subscribe / Ad Info / Home