American Housing Rescue and Foreclosure Prevention Act of 2008

Floor Speech

AMERICAN HOUSING RESCUE AND FORECLOSURE PREVENTION ACT OF 2008 -- (Senate - July 11, 2008)

BREAK IN TRANSCRIPT

Mr. SCHUMER. Mr. President, I rise today to briefly discuss the turmoil in the financial markets, especially with regard to Fannie Mae and Freddie Mac. Let me be clear, Fannie and Freddie are too important to fail. Their fundamentals, as they look now, provide no reason to think they will fail. We all know how important they are.

These two institutions are the foundation of the mortgage market, and we fully stand behind them and their crucial role. Without Fannie and Freddie, housing markets would come to an utter standstill and our economy, shaky as it is, would sink much deeper. Therefore, we should take all necessary steps to ensure affordable home ownership for millions of American families, and that includes preserving the essential role Fannie Mae and Freddie Mac play.

Our Nation is caught in the middle of one of the most severe housing downturns since the Great Depression, so it is not surprising that the two institutions that guarantee $5 trillion worth of mortgages for families across America are now facing real significant challenges. But the markets' overreaction over the past 2 days is more based on psychology than reality.

Over the past few days, Treasury Secretary Paulson, James Lockhart, the GSE's primary regulator, the Federal Reserve, and Chairman Bernanke, and leading Senators, including both parties' candidates for President, have all clearly stated their confidence in Fannie and Freddie and the Government's commitment to keeping those institutions safe and secure.

That commitment has not changed and will not change.

Fannie Mae and Freddie Mac are well capitalized. They are actually holding capital in excess of their current requirements.

In these volatile markets--in these volatile markets--share price is not the most reliable measure for judging Fannie and Freddie and will not dictate the responses by the regulators. Rather, the regulators are more closely watching the performance of Fannie's and Freddie's bonds and how their yields compare to U.S. treasuries. Right now, Freddie and Fannie bonds are trading closer to treasuries than they were in March after the Bear Stearns collapse, and that is a reassuring signal.

The stock markets may be overreacting, but the regulators should not and will not. I have talked to them on a regular basis today, and I can assure Americans in the markets that they are very much on top of this problem, they are looking at it in a careful, thoughtful, but nonpanicky and nonrush way.

We do not believe the regulators will be forced to act, but if they are, it is not a choice between inaction or full-blown receivership because there is more than one way to shore up Fannie and Freddie, if necessary. There are countless intermediate steps that regulators could take before ever having to entertain a Government takeover.

The regulators are preparing for worst-case scenarios. But developing contingency plans does not mean that disaster is around the corner. By simply being prepared, the Government can restore confidence that these institutions will remain safe and secure and continue to function in their essential role as the cornerstone of the mortgage markets for decades to come.

Mr. President, I yield the floor.

Source