Johnson-Crapo Bill passes Banking Committee, Margins Smaller than Hoped

S 1217, the Johnson-Crapo housing reform bill passed the Senate Banking Committee today.   Committee chairman Tim Johnson (D-SD) had hoped to send the bill to the whole Senate with at least 16 of the 22 committee members voting for the committee's recommendation, but was able to obtain only a 13 to 9 favorable vote.  Several Democrats including Elizabeth Warren (MA), Jeff Merkley (OR), Sherrod Brown (OH), and Jack Reed (RI) had spoken out strongly against the bill largely because it lacks a mandate for affordable housing.

The bill would, like an earlier Senate bill authored by Mark Warner (D-VA) and Bob Corker (R-TN) and the so-called PATH Act awaiting a vote in the House, wind down government sponsored enterprises Fannie Mae and Freddie Mac.  Unlike the PATH Act which would provide loan guarantees only for FHA loans, S 1217 would establish a new agency, the Federal Mortgage Insurance Corporation (FMIC) which would regulate a secondary market for selling loans and mortgage-backed securities and provide a catastrophic guarantee that would kick in only after mandatory levels of private capital were exhausted.

Observers feel that Johnson needed a stronger committee vote, especially one with more yes votes from Democrats in order to convince Senate Majority Leader Harry Reid to bring the bill to the floor.  The PATH Act which was voted on favorably by the House Financial Services Committee has similarly been waiting for several months for a full House vote but Speaker John Boehner has thus far failed to bring it to the floor.   Those observers feel that PATH, if it pass the House would not do so in the Senate because it virtually eliminates the government from housing finance.  Similarly the Senate bill stands little change in the house because of the catastrophic FMIC backstop.

Prior to the vote but apparently anticipating its outcome Johnson released a statement which said in part:  "When we opened up this markup two weeks ago it appeared we were very close to gaining additional bipartisan support for this bill. That being the case, I consulted with Ranking Member Crapo and other members of the Committee and decided to recess for a short time to take one last shot at finding additional support. After exhausting every option to try and strike a deal quickly that would add votes at the committee level, I have concluded it is best to move forward with the majority we have now in committee and continue working to build support for the bill as it moves to the floor."