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The Obama administration’s February report that outlined a series of near-term and long-term proposals for reforming Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac provided a starting point for Congressional debate—and now House Republicans appear ready to act.

This afternoon, Republicans on the House Financial Services Committee held a press conference to unveil eight separate proposals for providing near-term reforms to Fannie and Freddie. Several of the GOP proposals mirror those made by the Obama administration, including an increase in Fannie and Freddie’s guarantee fees and a winding down of both GSE’s investment portfolios, which currently hover around $1 trillion. Of particular significance, however, is the GOP’s omission of a long-term proposal for replacing Fannie and Freddie, highlighting the difficulty in significantly decreasing the GSE’s outsized role in the U.S. housing finance market.

Below is a summary of each GOP proposal: 

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Since President Obama signed Dodd-Frank into law on July 21, 2010, the financial industry has been anxiously awaiting the appointments of the key individuals to lead the newly-created offices of Financial Research (OFR) and Federal Insurance (FIO), along with the Consumer Financial Protection Bureau (CFPB). But now the wait is over—at least for the one director position that doesn’t require Senate confirmation.

Treasury Secretary Tim Geithner announced on Thursday that Michael McRaith, the director of the Illinois Department of Insurance, will assume the helm of the new FIO. Under Dodd-Frank, the Treasury-housed office will be charged with collecting, analyzing, and disseminating data and information gathered from the insurance industry in order to help coordinate federal insurance policy. (Health insurance and long term care insurance are excluded from the FIO’s purview).

In an effort to preserve the longstanding state-based regulatory structure for the insurance industry, Congress crafted language that explicitly prohibits the FIO from exercising regulatory or enforcement authority. However, voices on Capitol Hill and within the financial industry have expressed concerns with the FIO’s sweeping authority to collect data and how that may impact business compliance costs and data security.

One of McRaith’s primary functions as FIO director will be to serve as a non-voting member on the Financial Stability Oversight Council (FSOC)—a council of regulators charged with monitoring the broader financial system—requiring consultation with the Treasury Secretary as to whether certain insurers or insurance practices may pose systemic risk.

As the FSOC continues to issue proposed rules that will ultimately determine how regulators designate non-bank financial companies for heightened supervision, a bipartisan group of lawmakers—including Reps. Barney Frank (D-MA) and Ed Royce (R-CA)—have been urging the Obama administration to quickly fill the FIO director position in order for the insurance industry to have a voice at the table during the FSOC’s rulemaking process.

Under Dodd-Frank, the FIO Director is also empowered to negotiate—along with the U.S. Trade Representative—all international insurance agreements on behalf of the U.S.

Mr. McRaith has served as secretary/treasurer of the National Association of Insurance Commissioners (NAIC) and has represented state regulators in negotiations with the International Association of Insurance Supervisors and the international Organization for Economic Cooperation and Development.

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Coinciding with Elizabeth Warren’s inaugural testimony before Congress in her capacity as Special Advisor to the Secretary of the Treasury for the Consumer Financial Protection Bureau (CFPB) on Wednesday, House Financial Services Committee Chairman Spencer Bachus (R-AL) revived a dormant proposal that would decentralize the leadership of what Bachus calls the “most powerful agency that’s ever been created in Washington.”

Joined by 26 GOP colleagues, Bachus introduced H.R.1121, the Responsible Consumer Financial Protection Regulations Act, legislation that would replace the position of CFPB Director with a five-member Commission consisting of members that are nominated by the President and confirmed by the Senate. In addition, H.R. 1121 requires the commission to be comprised of no more than three members of the same political party—a bipartisan structure similar to that of the FTC, FDIC and SEC. According to Bachus, Dodd-Frank consolidates too much authority in the hands of a single CFPB director.

The commission structure—an idea first proposed in Congress by former Rep. Walt Minnick (D-ID) during the initial stages of the Dodd-Frank debate in 2009—has long been under discussion on Capitol Hill and was ultimately included within the financial reform legislation that first passed the House in December of 2009. (The commission language was ultimately scrapped during the House-Senate conference negotiations.)

Although no Democrats have signed onto H.R. 1121 thus far, House Republicans view the commission proposal as perhaps the most palatable CFPB reform option for Congressional Democrats, who have remained unified in resisting recent GOP efforts to slash the agency’s budget.

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Led by House Financial Services Committee Chairman Spencer Bachus (R-AL), 34 of the committee’s Republicans sent a letter to the six agency heads charged with implementing the Dodd-Frank Act stating that the members are “troubled by the volume and pace of rulemakings” under the Act. Citing the sheer number of rules, the diverse array of issue areas, and the truncated comment periods, the members are concerned that businesses and consumers will not have adequate opportunity to provide meaningful input into the process. The current comment periods are averaging 30-45 days as opposed to the typical 60 day periods that agencies usually allow for significant rules. The rushed time frames also cause the lawmakers to worry that the “consistency of rules across agencies” will be compromised and that the rules will not contain adequate regulatory flexibility for small businesses. The letter poses eight detailed questions to the financial regulators – the Treasury, Federal Reserve, Commodity Futures Trading Commission, Securities and Exchange Commission, Federal Deposit Insurance Corporation, and Comptroller of the Currency – and asks for their responses no later than March 25, 2011.

Click here for the full text of the letter.

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In an abrupt and somewhat anti-climactic fashion, House and Senate Congressional leadership temporarily averted the first government-wide shutdown since 1996 this week, agreeing to a two-week extension of a Continuing Resolution (CR) that will fund government operations through March 18.

With recent public polls showing that neither Democrats nor Republicans would benefit from a protracted budget stalemate, the White House is now ramping up its engagement, as Vice President Joe Biden and Congressional leaders are in the middle of behind-the-scenes negotiations to hammer out a long-term agreement to fund government operations for the remaining seven months of Fiscal Year 2011.

The recent budget deal and the White House’s active engagement may provide relief to some of the roughly 2 million civilian employees on Uncle Sam’s payroll, but don’t tell that to the folks at the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Despite substantial new regulatory responsibilities granted to the agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173), both the SEC and CFTC budgets for FY11 and FY12 are under attack.

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The House Financial Services Committee (HFSC) appears primed to strike the first blow against the Obama administration’s nearly two-year effort to mitigate U.S. home foreclosures through its signature Home Affordable Modification Program (HAMP). During a markup this morning, Chairman Spencer Bachus (R-AL) said a final committee vote will occur next week to terminate the program he argues is doing “more harm than good for struggling homeowners.”

Created in March of 2009, HAMP aims to assist struggling homeowners avoid foreclosure by providing federal incentives for borrowers, servicers and investors to modify delinquent home loans through interest rate reductions, mortgage term extensions, and temporary principal forbearance. Although the Obama administration’s initial goal was to permanently modify three to four million home loans, HAMP has led to only 600,000 permanent modifications. According to newly-released Treasury statistics, between April 2009 and the end of January 2011, 1.5 million HAMP trial modifications were initiated – meaning that well over half of all initial modifications have resulted in failure.

Although HAMP was originally provided nearly $30 billion under the Troubled Asset Relief Program (TARP), as of February, only $1.04 billion in incentive payments have been disbursed to mortgage servicers under HAMP, according to the Congressional Research Service.

Critics of HAMP often cite an October 2010 report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) asserting that failed loan modifications under the program have led to higher outstanding principal, less home equity, and worse credit score for some participating troubled borrowers. Critics have also noted that no enforcement mechanisms are in place for servicers who violate the HAMP guidelines, largely due to the program’s voluntary nature.

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Entitled "The Effect of Dodd-Frank on Small Financial Institutions and Small Businesses,” Wednesday afternoon’s hearing before the House Financial Services Subcommittee on Financial Institutions & Consumer Credit was intended to provide a venue for banking industry leaders to decry the oft-maligned Consumer Financial Protection Bureau (CFPB) and other potential regulatory hurdles stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173).

Interchange fees, however, appeared to be all banking industry leaders wanted to talk about—providing the latest signal that the Congressional debate over the controversial “Durbin Amendment” is far from over.

In 2010, the National Association of Federal Credit Unions (NAFCU), the Independent Community Bankers of America (ICBA) and other influential banking industry groups waged a full-scale—albeit unsuccessful—lobbying effort to strip from the Dodd-Frank legislation an amendment offered by Sen. Richard Durbin (D-IL) that would require the Federal Reserve to enact rules to limit the interchange fees paid by retailers and merchants for the acceptance of debit card payments. Although the Durbin amendment attempted to limit the exposure to credit unions and community banks through the inclusion of an exemption for banks with assets of $10 billion or less, witnesses at Tuesday’s hearing say a proposed rule issued by the Fed in December limiting fees from the current 44-cent average to 7-12 cents per transaction would have a “potentially devastating” effect on small financial institutions and consumers.

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Anecdotally, the Securities and Exchange Commission is receiving one or two "high value" whistleblower tips and complaints a day since the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) statute was signed into law in July 2010. The statute, which enacts sweeping financial regulatory reforms, establishes an expansive whistleblower program. The program provides that a whistleblower, who voluntarily gives “original information” to the SEC that leads to a successful enforcement action with penalties exceeding $1 million, will receive a reward between 10 to 30 percent of the total recovery. To further incentivize whistleblowers, the Act allows for whistleblowers—who can be “any individual,” including corporate insiders, consultants, and service providers—to remain anonymous and cooperate with the SEC through an attorney. The Act also provides robust anti-retaliation protections, which permit federal lawsuits for wrongful termination, suspension, harassment, or other discrimination resulting from the whistleblower’s reporting to the SEC.

In enacting this whistleblower program, Congress sought “to motivate those with inside knowledge to come forward and assist the government to identify and prosecute persons who have violated securities laws and recover money for victims of financial fraud.” But, how does this expanded SEC whistleblower program impact corporate compliance programs, many of which were enacted to combat bribery and corruption in the wake of Sarbanes-Oxley?

Last November, the SEC proposed regulations to implement Dodd-Frank. Although the proposed rules make clear that they are not intended to discourage corporate whistleblowers from first availing themselves of their company’s compliance program, many companies nonetheless fear that the average employee has little or no incentive to provide his or her employer with an opportunity to investigate, and, if necessary, correct and self-disclose alleged wrongdoing. Doing so, after all, likely would eliminate that employee’s prospects of receiving a significant award.

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In the political heat of the 2010 Congressional debate over the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173), Republicans in both the House and Senate offered up amendments that would have eliminated the federal government’s $150 billion support of the beleaguered housing giants, Fannie Mae and Freddie Mac, and would have led the two Government-Sponsored Enterprises (GSEs) on a speedy path to full privatization.

In 2011, with a new House majority and the Financial Services Committee (HFSC) gavel in hand, the GOP and its previously-offered proposals for reigning in Fannie and Freddie—which collectively guarantee or own an estimated 50 percent of all new U.S. home mortgages—do not appear as simple or clear-cut in practice.

At the heart of the questions raised at this morning’s HFSC hearing over the Obama administration’s newly-released proposals for GSE reform were what the federal government’s long-standing role in the housing finance system should be and how a diminished federal role will affect U.S. homeownership, consumer access to credit, support for low-income communities, and a still-fragile U.S. housing market.

Providing testimony was Treasury Secretary Timothy Geithner, who relayed the Obama administration’s hope that Congress can approve legislation within the next two years to dismantle Fannie and Freddie over an extended timeframe and slowly shift the mortgage credit industry closer to the private market. Geithner cautioned against Congress moving too slowly or too quickly, stating that either move could further destabilize the U.S. housing market and potentially disrupt the broader economic recovery.

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