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March 12, 2014 4:02 pm
Housing finance reform has been one area in which Republicans and Democrats have been able to work together, raising hopes that a deal on the future of Fannie Mae and Freddie Mac may be possible, even if it is only after November’s congressional elections.
In the highly partisan House of Representatives, a small group of moderate Democrats are using their backgrounds as financial dealmakers to achieve the apparently unthinkable: working with Republicans to pass bills.
The Senate would need to negotiate with the House to come up with a Fannie and Freddie plan that could pass through Congress and this group could hold the key to its passage.
Congressmen John Delaney, who started two companies that went public and is one of the richest members; Jim Himes, a former Goldman Sachs banker; and John Carney, who was finance secretary of incorporation state Delaware, have become some of the go-to people when Republicans need Democratic support on financial issues.
At times, they have even backed Republicans over Democrats or pushed bills that were not favoured by their own party. The three men worked on a proposal unveiled in January to wind down the US mortgage finance giants, which they say could gain more bipartisan support than other bills.
“The best course of action moving forward is a bipartisan, bicameral approach,” the three Congressmen said on Tuesday after leaders of the Senate banking committee released their Fannie-Freddie plan. “We have introduced an innovative model that marries private sector pricing with the government’s ability to provide capacity.”
To build support, the three representatives have provided regular updates on their plan to House Republican Jeb Hensarling, head of the financial services committee, who has his own Fannie-Freddie plan that would essentially cut the government out of housing finance. But that plan is seen as too extreme by some, such as Maxine Waters, the top Democrat on the committee, who also has a housing finance reform plan.
Messrs Delaney, Carney and Himes have also consulted with Ms Waters and have taken advantage of their Republican relationships to pitch their plan. Republican Representative Stephen Fincher, who has worked with Mr Delaney and Mr Carney on bills, has found them to be good partners on “plain common sense” issues, according to Mr Fincher’s spokeswoman.
The three Democrats have also pushed separate bills that have garnered bipartisan support. Mr Delaney’s plan to use companies that are flush with overseas cash to help rebuild roads and bridges has been gathering steam. The bill now has 27 Democratic and 26 Republican co-sponsors in the House.
“My Republican colleagues are right that there is not enough investment capital flowing into the economy, and my plan addresses that while also improving our deteriorating infrastructure,” said Mr Delaney, who thinks some of the Dodd-Frank financial reform mandates should be re-examined.
For Mr Himes, that view has meant sometimes facing accusations of being a Wall Street lackey. He pushed a bill that would allow banks to trade what he calls certain “plain vanilla” derivatives. The bill passed in the House, with some Democrats opposing it.
Dodd-Frank required certain banks to move their derivatives business to separately capitalised affiliates, about which former Ben Bernanke, Federal Reserve chairman, expressed reservations because it created other risks.
“The popular rhetoric is Wall Street is bad and Main Street is good. But in terms of policy, it’s meaningless,” said Mr Himes, who worked on parts of Dodd-Frank. “That doesn’t mean blindly supporting Wall Street. But we need to look at what regulation is good and what is bad in a rational way.”
Last month, the House passed a bill Mr Carney co-sponsored with Republican Representative Sean Duffy. The plan would create a pilot programme under the Securities and Exchange Commission that would allow stock of small companies to be traded in larger increments to increase liquidity for them.
Mr Carney was the only Democrat to co-write the JOBS Act, which has made it easier for smaller start-ups to go public. As part of it getting through the House, Mr Carney voted against Democratic amendments to the bill.
“That was tough,” Mr Carney said. “But that’s the way you build trust with the other side and I’m using that now to work on other issues.”
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