By Vicki Needham - 05/15/14 11:20 AM EDT
The Senate Banking Committee in a 13-9 vote on Thursday approved legislation to wind down Fannie Mae and Freddie Mac.
Several Democrats voted against the measure co-authored by Chairman Tim Johnson (D-S.D.) and ranking member Sen. Mike Crapo (R-Idaho), however, providing little pressure for Senate Majority Leader Harry Reid (D-Nev.) to move the bill to the floor.
“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,” Johnson said.
Critics of the bill had worried it would make it tougher for some people to obtain mortgages, particularly the popular 30-year fixed rate loan. That was at the root of why some Democrats on the panel objected to the measure.
Several Democrats who opposed the bill tried to reassure panel leaders that they want to continue working toward changes, but it is unclear whether a compromise can be found.
Sen. Mark Warner (D-Va.), who backed the bill, said punting on it would only put taxpayers in greater jeopardy of being on the hook for any future losses at Fannie and Freddie, whose profit sources are running dry.
Warner said that complaints about the complexity of the bill should not be a default for the status quo.
“Those who say we can punt, let’s wait till next week, next year, next Congress you come back next quarter and some of these enterprises are coming back to the taxpayer because we didn’t take the actions to move forward on a bipartisan, substantive multi-year transition … then shame on us, ” he said during the markup.
“This is the time to take this bill, improve it and get it to the floor.”
Warner argued that the measure would protect the taxpayers, ensure better access for low-income borrowers and preserve the government-backed 30-year mortgage.
“You think Richard Shelby has opposition today, wait until the next time taxpayers are drawn upon,” he said.
Shelby, an Alabama Republican, argued that the bill would lock in government control of the housing market and leave taxpayers footing the bill for future problems.
“Unfortunately, we’ve had decades of government intervention that ironically did not even deliver on its main goal of providing sustainable home ownership for millions,” he said.
While lawmakers detailed their problems with the reform bill, they also expressed support for the effort to overhaul Fannie and Freddie.
“Members of this committee may differ as to how we believe the housing finance system should look and function going forward over the long term, but I dare say not one member that believes nothing should be done to improve the current system,” said Sen. Charles Schumer (D-N.Y.), who voted against the bill.
Sen. Elizabeth Warren (D-Mass.) said that the proposal “does not do enough to produce a housing market that works for middle-class America.”
She argued that the measure could shut out another 20 percent of eligible borrowers and could drive smaller lenders from the market.
Sen. David Vitter (R-La.), another "no" vote, echoed the concerns of Warren, saying the bill should provide a “full vibrant role for small institutions” and ensure that all mortgage business doesn’t shift to big banks.
“However we vote, the message is clear, no one here, I don’t think there’s any will in Congress to simply patch up Fannie and Freddie, send them back into the marketplace,” he said.
“I think there’s real focus and real will to fundamentally reform them.”
Sen. Jeff Merkley (D-Ore.), another Democrat in opposition, said he still has “substantial concerns” about the bill, but expressed optimism that the measure could be changed to address them.
“I think this bill has been modified in ways that may be close to the best possible approach one can make,” he said.
“There are areas that I and others have suggested we can continue to improve it, but the heart of it is we should wrestle with this.”
Some panel members had said they wanted to make as much progress on the measure before the committee completed its work.
But with less than three months left until the August recess, supporters will need to step up their efforts for any chance to build more support and push the bill to a floor vote.
“While we’ve made some progress on some of these issues before we pull the trigger on a major overhaul we need to be confident that each element can work as intended,” said Sen. Robert Menendez (D-N.J.).
— This story was updated at 1:13 p.m.