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Republicans Pressed To Block Obama Housing Actions

Republicans Pressed To Block Obama Housing Actions

By Ben Weyl, CQ-Roll Call (TNS)

WASHINGTON — Add affordable housing to President Barack Obama’s list of unilateral actions on which he’s flexing his muscles at an unfriendly Congress.

The administration’s steps to expand mortgage lending and promote affordable housing may not have drawn the kind of attention that his actions on immigration have, but they have infuriated GOP lawmakers already feverishly trying to block the earlier actions.

As with the president’s other orders, however, Republicans’ options are limited. They lack a filibuster-proof majority in the Senate, let alone the votes to overturn a presidential veto of legislative obstacles. So the executive branch is moving forward.

At stake is whether the administration can unleash additional credit to a mortgage market many housing analysts view as too tight. But Republicans are warning that Obama is going too far, setting the stage for the reckless lending and subsequent housing crash that fueled the 2008 financial crisis.

Obama announced last month the Federal Housing Administration would lower its annual mortgage insurance premiums by 0.5 percentage points, to 0.85 percent from 1.35 percent. The White House says the move would save new borrowers roughly $900 per year and bring in new homebuyers to boost the housing market.

Roughly 234,000 creditworthy borrowers were priced out of the market in 2014 because of high FHA insurance premiums, according to the National Association of Realtors. The lower premiums would likely help first-time homebuyers and historically under-served borrowers such as low-income and minority purchasers.

Meantime, the Federal Housing Finance Agency said in December it would direct Fannie Mae and Freddie Mac to start sending money to the National Housing Trust Fund and the Capital Magnet Fund, two currently empty trust funds designed to promote affordable rental housing and lending for homeownership. The funds would receive 0.042 percent of the mortgage giants’ new business. Housing activists estimate that would bring $300 million to $700 million to the funds annually.

Those steps followed FHFA Director Melvin Watt’s announcement in October that Fannie and Freddie, which the FHFA oversees, would guarantee some mortgages with just 3 percent down payments, a reduction from 5 percent, in a bid to boost access to credit for low-income borrowers. The move is intended to help creditworthy borrowers who don’t have the savings to put down a lot of money up front. Watt said recently those loans would comprise “a very, very small percentage of the overall portfolio.”

Congressional Republicans condemn all three moves, saying they would put taxpayer dollars at risk and encourage a new wave of irresponsible lending.

“Memories are clearly short among Washington’s ruling class, because they are repeating the same mistakes that caused the 2008 financial crisis in the first place,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX).

GOP lawmakers say the FHA shouldn’t lower premiums when its mortgage insurance fund still lacks the capital reserves required by law. They note Treasury gave the agency a $1.7 billion taxpayer-infusion in 2013, the first such payment in FHA’s 80-year history. Republicans also point out Fannie and Freddie took $187.5 billion in public funds in 2008 and remain in government hands. They say the revenue should go to taxpayers, not to affordable housing, and argue that lowering the down payments on Fannie- and Freddie-backed mortgages encourages the kind of loans that went bad in 2007 and 2008.

The administration, which is strongly backed by the housing industry and housing activists, doesn’t sound worried.

Julian Castro, secretary of the Housing and Urban Development Department, which houses the FHA, says the agency’s insurance fund is back in the black and FHA is still projected to reach its required 2 percent capital reserve ratio in 2016.

Watt, a Democrat backed by his former colleagues in Congress, said Fannie and Freddie should start sending the trust funds money now that the companies are healthier and have sent back billions more to Treasury than they accepted. And Watt rejects the charge of shoddy lending, noting borrowers would have to abide by guidelines to reduce the risk of default, including having stronger credit histories, lower debt-to-income ratios and extra private mortgage insurance.

Republicans have a slim chance of success of blocking the initiatives, but they have several legislative avenues to obstruct the administration.

The most potent would be to reverse the policies through the appropriations process.

Raising FHA premiums in spending bills is “certainly doable,” said Mark Calabria, a former GOP Senate Banking Committee aide and now director of financial regulation studies at the libertarian Cato Institute.

The FHA relies on congressional appropriations, but lawmakers’ next chance likely won’t come before the fall, when fiscal 2015 funding expires. The agency could have been applying the lower premiums for nine months by then. And Democrats in the Senate and White House would resist forcing the premiums up in the next fiscal year.

Reversing policies by the FHFA could prove even harder. An independent agency that acts as regulator and conservator of Fannie and Freddie, the FHFA doesn’t receive funds from Congress. Lawmakers typically steer clear of restricting the activities of independent agencies in spending bills.

Republicans also could try to advance legislation targeting the administration’s housing initiatives. They are likely to encounter the same Democratic resistance in the Senate, but the GOP is already trying.

Rep. Ed Royce (R-CA), a senior member of the Financial Services Committee, is drawing up a bill (HR 574) to prohibit Fannie and Freddie from filling the affordable housing trust fund. GOP lawmakers also could try to advance broader measures targeting the FHA and Fannie and Freddie. Hensarling moved legislation in the last Congress to sharply restrict the FHA’s lending powers and wind down Fannie and Freddie.

GOP critics are also using their bully pulpit to publicly criticize the administration and are calling Castro and Watt to explain themselves.

Watt came under fierce criticism from Republicans when he testified at the Senate Banking Committee in November.

Hensarling also announced he would call Castro to testify before the committee and defend the premium reduction, which he called “a grave mistake.” Hensarling has demanded documents from Castro about the department’s justification of the premium reduction after taking funds from Treasury in 2013.

“They’ll really try to strip the bark off him in terms of FHA’s previous risk management practices,” said one housing industry lobbyist.

Calabria said raising pressure on the administration through statements, letters and tough oversight hearings would be a constant under the Republican-led Congress.

“Obviously the impact of these things is small, but it isn’t zero,” he said.

Photo: House GOP via Flickr

Republicans In Congress Begin New Effort To Water Down Dodd-Frank Law

Republicans In Congress Begin New Effort To Water Down Dodd-Frank Law

By Jim Puzzanghera, Los Angeles Times (TNS)

WASHINGTON — Boosted by their November election gains, congressional Republicans have launched a new effort to weaken, bit by bit, a law that dramatically expanded federal oversight of the financial system after the Great Recession.

On Wednesday, the Republican-controlled House is expected to pass a package of bills making changes to the 2010 law, known as Dodd-Frank, which also created a powerful new agency to protect consumers.

The law was enacted over nearly unanimous opposition from Republican lawmakers. Many despise Dodd-Frank almost as much as they do Obamacare because they believe it’s an overreaction to the 2008 financial crisis and an unnecessary burden on business.

Now with a Senate majority too, Republicans no longer have to worry about Democrats stopping attempts to chip away at the law’s hundreds of regulations, though President Barack Obama’s veto pen looms in the White House.

“The truth is Dodd-Frank was not chiseled in stone. Nobody brought it down to us from Mount Sinai,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX), who is leading the effort to change the law. “Congress would be negligent in its duties if we did not continually monitor and fix Dodd-Frank’s unintended consequences.”

In the last few weeks, Republicans watered down key parts of Dodd-Frank by attaching provisions to so-called must-pass bills — one funding most of the federal government and another reauthorizing an important terrorism risk insurance program that had expired. Obama signed the bills despite his opposition to their changes in Dodd-Frank.

The maneuver provided an early road map to how the new Republican-controlled Congress might try to make long-sought changes to financial regulations over Obama’s objections.

Liberal Democrats, led by Sen. Elizabeth Warren (D-MA) and Rep. Maxine Waters (D-CA), are rallying to stop the effort.

They nearly derailed the government funding bill last month because it contained a provision that eased Dodd-Frank restrictions on bank trading of financial derivatives — the type of complex investments that helped trigger the financial crisis.

Liberals’ anti-Wall Street fervor was highlighted this week when investment banker Antonio Weiss withdrew his nomination to a senior Treasury Department position because of opposition from Warren and others who objected to his Wall Street background.

“We’ve already seen that the new Republican Congress is going to aggressively attack the Dodd-Frank act,” said Warren, who was an outspoken advocate for the legislation. She launched the law’s Consumer Financial Protection Bureau before winning a Senate seat in 2012.

“The risk of another financial crisis remains too high, and we should be strengthening financial reforms, not rolling them back to benefit Wall Street,” she said.

The proposed changes before the House now include a controversial two-year delay in implementing part of the so-called Volcker Rule, which bars banks from making risky investments. The changes are necessary, supporters say, to avoid saddling businesses with heavy-handed regulations.

The White House said Obama would veto the bill because “the administration has strong concerns with any provisions that would weaken key consumer and investor protections and elements of financial oversight.”

Most Democrats have vowed to keep the law intact.

“We have seen this movie before,” said Sen. Sherrod Brown (D-OH). “We will keep seeing it over and over again.”

But some changes are needed, said Francis Creighton, executive vice president of government affairs at the Financial Services Roundtable, an industry trade group. He argued that Democrats are overreacting to sensible and relatively small-scale fixes.

“Sometimes we’re trying to do things that will actually make the system work better,” he said. “We’re not always twisting our mustache, doing this villainously.”

The delay in the Volcker Rule, for instance, is necessary to avoid pushing banks into getting rid of some assets in a “fire sale” fashion, Creighton said. The legislation in the House would extend an existing delay in implementing the rule to 2019 from 2017.

Republicans note some of the Dodd-Frank changes have bipartisan support.

The legislation that includes the Volcker Rule delay, called the Promoting Job Growth and Reducing Small Business Burdens Act, garnered 35 Democratic votes last week when Republicans unsuccessfully tried to pass it in an expedited procedure that required a two-thirds vote.

The focus liberals have put on changes to Dodd-Frank in recent weeks has made it tougher for Democrats to support the Republicans, said former Rep. Barney Frank (D-MA).

“I’ve talked more about the bill in the last couple of months than in years, and that’s a good thing,” said Frank, who led the effort to pass it in the House in 2010. “It’s now become a national issue again and I’m very confident the public will become very angry” if Republicans continue to attack it.

The biggest mistake Republicans could make would be to try to weaken the Consumer Financial Protection Bureau, which is popular with the public, Frank said.

The bureau has a director, who is appointed by the president to a five-year term, and is funded directly by the Federal Reserve, which means Congress can’t cut its budget.

Republicans complain the agency is too powerful and want to replace the director with a five-member commission and subject its funding to the congressional appropriations process. The House has approved legislation in the past to make those changes, but the bills have died in the Senate.

It’s unclear whether Senate Republicans now will be able to pass Dodd-Frank changes. If they do, Obama will veto them, said Treasury Secretary Jacob J. Lew.

Republicans could then try to force Obama’s hand by including the changes in must-pass bills. Last week, for instance, they added to the terrorism risk insurance bill a provision to exempt agricultural and energy companies from requirements to post collateral when trading derivatives.

Warren and other supporters of Dodd-Frank have called such maneuvers legislative hostage-taking.

“If we fail to challenge this cynical strategy now, it will only encourage Republicans to pull our financial regulations apart piece by piece,” Warren told her colleagues last week. But an attempt to remove the provision from the bill was defeated 66-31.

Photo: House GOP via Flickr

Congress Could Enact Rollback Of Dodd-Frank Limits On Derivatives

Congress Could Enact Rollback Of Dodd-Frank Limits On Derivatives

By Jim Puzzanghera and Lisa Mascaro, Tribune Washington Bureau (TNS)

WASHINGTON — Congress is poised to enact the first significant rollback of the sweeping 2010 overhaul of financial regulations by including in a government spending bill a provision that eases bank trading of complex derivatives.

The provision sparked controversy as lawmakers prepared to vote on the $1.1 trillion package that must pass before a Thursday night deadline to avoid a federal government shutdown.

Derivatives and other complex securities were blamed in part for triggering the 2008 financial crisis. New limits on their trading were a key component of the Dodd-Frank financial reform law.

The restrictions would force banks to spin off risky derivatives trading into separate units that would not be backed by federal deposit insurance and would not have access to low-cost Federal Reserve lending. Regulators still are working on fashioning rules to implement the restrictions.

Financial reform supporters were outraged Wednesday that the provision easing derivatives restrictions, based on legislation that passed the House in 2013 but never got a Senate vote, was included in the spending bill.

“This is by far the largest repeal of a significant financial reform provision since the crash,” said Dennis Kelleher, chief executive of Better Markets Inc., a Washington advocate of stricter financial regulation. “It shifts the downside of Wall Street’s high-risk derivatives-dealing back to the taxpayers.”

A coalition of key liberal lawmakers and advocacy groups scrambled to save the derivatives restrictions.

“We put this rule in place after the collapse of the financial system because we wanted to reduce the risk that reckless gambling on Wall Street could ever again threaten jobs and livelihoods on Main Street,” said Sen. Elizabeth Warren (D-MA). “We all need to stand and fight this giveaway to the most powerful banks in the country.”

Warren and Rep. Maxine Waters (D-CA), the top Democrat on the House Financial Services Committee, urged the House to yank the provision before Thursday’s vote.

But with just days remaining before Congress is set to recess for the holidays, changes appeared unlikely.

The overall spending bill was negotiated by leaders of the Republican-controlled House and the Democratic-controlled Senate. Republicans had wanted to include several other changes to Dodd-Frank in the funding bill, but Democratic leaders balked.

In a win for Democrats, Republicans agreed to provide more money to the Commodity Futures Trading Commission, which regulates the derivatives market. The agency’s funding would increase by $35 million to $250 million for the government’s fiscal year, ending next Sept. 30.

Major Wall Street banks, such as Citigroup Inc. and JPMorgan Chase & Co., handle the vast majority of derivatives transactions and lobbied hard to scrap the restrictions.

James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Assn., said banks have a broader concern.

“Folks are trying to paint this as, ‘This helps Wall Street,’ but we’ve had banks of all sizes saying this is going to impact them,” he said.

Derivatives, also known as swaps, can be used to offset in part, or hedge against, changes in foreign exchange rates or prices of commodities, such as oil and soybeans.

Republicans have argued that the restrictions would make it harder for business owners to use derivatives. Their proposal last year passed the House 292-122, with the support of 70 Democrats.

The provision is a “common-sense … bipartisan, House-passed reform that would protect manufacturers, farmers, ranchers and Main Street businesses from onerous regulations that will hurt our economy,” said Kevin Smith, a spokesman for House Speaker John A. Boehner (R-OH).

But derivatives such as credit default swaps were a major factor in spreading the contagion from defective mortgage-backed securities throughout the financial system.

“In 2008, we learned the economic consequences of conducting derivatives trading in taxpayer-insured banks,” said Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp.

The restrictions in Dodd-Frank are “an important step in pushing the trading activity out to where it should be conducted: in the open market, outside of taxpayer-backed commercial banks,” he said.

Hoenig said that banks now can keep almost 95 percent of derivatives, including those dealing with interest rates and foreign exchange, under the Dodd-Frank law. It focuses only on the riskiest derivatives, such as credit default swaps, he said.

Former Rep. Barney Frank (D-MA), co-author of the financial reform law, said derivatives regulation is “a legitimate subject for debate.” But the issue should be the subject of hearings instead of being included in a last-minute funding bill.

“This is a road map for the stealth unwinding of financial reform,” he said in warning about Republican efforts to make changes in a must-pass budget bill.

Republicans strongly opposed the Dodd-Frank bill and have been trying unsuccessfully to loosen some key regulations, such as weakening the new Consumer Financial Protection Bureau.

The party will have more clout next year after big midterm election wins last month gave it control of the Senate to go along with a strengthened House majority, said Edward Mills, a financial policy analyst at FBR Capital Markets & Co.

“It really does show the potential for significant changes now that Republicans have control of both the House and Senate,” he said.

Rep. Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, was not part of the negotiations for the spending bill. But if he were, he said, “it would be open season on Dodd-Frank.”

Photo: Sebastian Alvarez via Flickr

Another Boehner Coup Attempt Expected, Despite Long Odds

Another Boehner Coup Attempt Expected, Despite Long Odds

By Matt Fuller, CQ Roll Call

WASHINGTON — Speaker John A. Boehner is on a stronger footing with the House Republican rank and file than he has been in years. But when the new Congress convenes in January, that won’t stop the party’s anti-Boehner wing from staging another revolt.

Lawmakers and aides say Boehner has improved his position in the GOP conference since the start of 2013, when 12 Republicans surprised the Ohio Republican on the floor by refusing to vote for him as speaker.That 2013 coup attempt went nowhere, but the anti-Boehner effort in the new 114th Congress is counting on reinforcements.

At least five conservatives likely to win in November already say they’re apt to support someone else for speaker. Several current members — Walter B. Jones of North Carolina, Paul Gosar of Arizona, Louie Gohmert of Texas — openly admit they won’t support Boehner. And even members who support the speaker acknowledge that he will face opposition.

Indiana Republican Marlin Stutzman said he will vote for Boehner come January, but that there could be 20 to 50 Republicans voting against Boehner.

“It’s interesting, you know, some of the people that have approached me,” Stutzman said. “(I was) surprised that they were in that camp. It’s not your typical, traditional folks you would think.”

Stutzman’s office said his number is simply speculation.And even if there are enough votes to initially keep the speaker’s gavel from Boehner’s hand,there is no challenger yet to the man who has reigned atop the Republican Conference for nearly nine years.

“I think it’s hard to beat somebody with nobody,” Stutzman said.

Several members involved in the last effort to dethrone Boehner said the ultimate failing of the insurrection was not presenting members with a clear alternative. And with former Majority Leader Eric Cantor (R-VA) gone, a Boehner successor is even less apparent.

House Budget Committee Chairman Paul D. Ryan of Wisconsin could put together a viable candidacy, but has shown no indication that he will. And House Financial Services Committee Chairman Jeb Hensarling has toyed with the idea. But his support in the conference might be overstated, and the Texas Republican seems to sense that now is not the time.

Hensarling’s communications director, Sarah Rozier, said her boss “doesn’t find speculative conversations about leadership elections to be a productive exercise,” and that he “intends to support the speaker candidate that receives the support of the Republican Conference.”

“And at this point he expects that person will be John Boehner,” she said.

In other words, Hensarling vs. Boehner is a long shot.

“I just don’t see it,” Rep. Tom Cole (R-OK) said of a Hensarling challenge. “That doesn’t mean he won’t run for speaker at some point. But again: Jeb plays by the rules. And if you’re going to run for speaker, it’s awfully late to mount that.”

Cole didn’t see anyone posing a legitimate challenge — “Boehner is safer than all the gold in Fort Knox”– and he thought the opposition from the congressional newcomers was exaggerated. There is a lot of pressure, he said, on new members to not “go out there on your very first vote and embarrass yourself.”

Cole said there’s already an effort underway from state party officials and national Republican figures to rein in the newcomers.

And that’s what many of the would-be Republican rebels seem to miss. As much chatter as there is about a coup, Boehner allies have their own plans for gumming up any plots against the speaker.

One senior aide said that even if Boehner doesn’t secure the votes on an initial ballot, there’s no guarantee Republicans would, as opponents expect, halt the inaugural festivities and hold a special conference meeting. Conservatives have long believed that if they could deny Boehner a first-ballot victory, the conference would be thrown into chaos and a legitimate challenger would emerge.

Instead, leadership could simply hold the vote open, twist arms, and maybe even hold another vote immediately after the first. Or hold many successive votes, until someone caves.

The point is: Boehner and his allies control the process. Even if his opponents could prevent him from becoming speaker on a first ballot — something that hasn’t happened since 1923 — the situation is unlikely to go down as the conservative rabble-rousers envision.

There has also been discussion of punishing anyone bucking the party line, first reported in May by Politico, and expanded upon recently by National Journal. But a senior Republican leadership aide said the idea of stripping rebels of their committee assignments is “not currently under consideration.”

As long as Republicans manage to navigate the lame duck session, it seems Boehner’s speakership isn’t in any real danger.

Of course, the session will be tricky, as Congress battles over whether — and when — to debate and vote on authorizing military force in Iraq and Syria. Boehner is presented with choices that are certain to anger at least somebody. And Congress still has an omnibus spending bill to address by Dec. 11.

And then there are the Republican conspiracy theorists who believe Boehner has been waiting for the lame duck session to pass a comprehensive immigration bill.

“If he pushes an immigration bill, it’d probably create more opposition than anything else he could do,” Jones said.

Jones, who swears he won’t support Boehner come January, has been meeting with a small group of conservatives — about seven — looking to oust the speaker. But he insists that opposition to Boehner extends much deeper into the conference.

Jones said he thought there were other groups talking. It’s just that those groups don’t appear to be talking with each other.

Short of a sudden and dramatic change of opinion, Boehner appears confident. He’s already sharing plans for the 114th Congress, talking about making a tax overhaul a priority, a highway bill and the possibility of an immigration rewrite.

He spent much of the 113th Congress repairing relationships in the party conference. He emerged from the shutdown stronger in the eyes of conservatives. And even though — as Democrats are quick to point out — the House was unable to accomplish much, leaders worked through issues and produced legislation that eventually won the support of many of Boehner’s biggest detractors, such as the farm bill and, more recently, the border security measure.

Furthermore, much of the conference seems content with the new leadership ushered in after Cantor’s surprise defeat in June, and many think Boehner is the steady Republican hand needed at the top.

Of course, there are still elections on Nov. 4. And Republicans could re-evaluate their leadership choices if they don’t win the Senate, or, more damningly, lose seats in the House.

But Boehner’s hold over the conference could just as well be cemented by the elections.

Should Republicans gain House seats and take majority control of the Senate, dissidents may balk at the idea of angering someone who is almost certain to be speaker again.

As Jones said, taking down a sitting speaker on the House floor would take members who are committed — “and I don’t know if they’re there or not.”

AFP Photo/Mark Wilson