Housing reform GSEs should respect shareholders’ rights, too

Dear Editor,

Louisiana is finally beginning a slow recovery from the housing crisis of a few years ago. Unfortunately, just as things start to improve, some elected officials in Washington, D.C., are pushing legislation that could have a detrimental effect on that upswing.

Proposed legislation by Sens. Tim Johnson (D-North Dakota) and Mike Crapo (R-Idaho), (the Johnson-Crapo Bill), is well intended to offer reform to the two government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and agreed, some manner of reform is probably a good thing.

However, this plan replaces them with a massive new federal entity called the Federal Mortgage Insurance Corporation. That new structure would explicitly back mortgages, and its design will most likely increase fees and monthly payments for any new home purchaser due to new bank fees. It could also put taxpayers on the hook for $5 trillion in liabilities.

But almost worse than the effect on future home building, the Johnson-Crapo Bill would wind down Fannie and Freddie over five years and wipe out the funds of GSE shareholders in the process. Since January 2013, the U.S. Treasury has been taking 100 percent of Fannie and Freddie’s profits, money that belongs to stockholders. The new legislation does nothing to stop this taking and, in effect, codifies it. The stopgap money previously advanced by the Treasury has been repaid, yet the government is still sweeping funds. A group of like thinking investors has been formed, Investors Unite, and we are outraged that investors are being treated in such a manner by the government.

Taxpayers in general and shareholders in particular should be very concerned about the intent of this legislation and its possible precedent. It is my hope that our senatorial delegation will work to develop some other manner of reform for the GSEs; one that respects the rights of shareholders while still moving toward housing reform.

Michael A. Mitternight,

President, Factory Service Agency,

Metairie, La.