While the Millstein and Swagel proposals face the politically difficult hurdle of getting politicians to support rebuilding Fannie and Freddie, they take great pains to argue they are not merely endorsing a return to the old system where GSE profits -- boosted by an implicit government guarantee -- went to shareholders and taxpayers were stuck with the losses.
They argue for higher capital requirements for the GSEs, and a government backstop for the mortgages they guarantee, but not for the institutions themselves. Whether that proposal keeps the government far enough away to satisfy Corker and other lawmakers remains to be seen, however.
For the time being, Corker wants to be sure the GSEs aren't privatized without the consent of Congress, and that their profits don't turn into a "piggy bank" for pet projects. With those goals in mind, he has co-sponsored legislation called the Jumpstart GSE Reform Act, along with Sen. Elizabeth Warren (D., -Mass.), David Vitter (R., La.) and Sen. Mark Warner (D., Va.) to ensure that the Treasury can't sell its stake in the GSEs without Congressional consent, and that increases in the fees it charges can't be used to offset other government spending.
"It's pretty unbelievable to me that we have so many people who are worried about the housing market getting rolling even more healthfully than it is today and at the same time they're jacking up the cost of loans by [increasing insurance costs charged by] Fannie and Freddie and using it to fund government expenditures," Corker said. "It's unbelievable that that's been taking place, and I hate to say it but over the last couple of years people on both sides on the aisle have been doing that. It's beyond belief to me that that's what we'd be doing."
Written by Dan Freed in New York