Rep. Schweikert Discusses Republican Unveil of GSE Reform on CNBC's Squawk Box
Rep. David Schweikert (R-AZ), Vice Chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises appeared on CNBC's Squawk Box this morning to discuss Republican efforts to unwind Fannie Mae and Freddie Mac. Here is the video and excerpts from the interview:
SCHWEIKERT ON HIS BILL THE "GSE RISK AND ACTIVITIES LIMITATION ACT":
"We've been going up and down Fannie and Freddie and saying "how can we avoid the continued hazard of bad acts ending up on the American taxpayers?' One bill we're introducing today is to make sure Fannie and Freddie don't go off and start securitizing car loans and other types of activities that keep them focused where they're at. It's sort of like playing with a little drop of mercury. We're trying to keep them in one place."
SCHWEIKERT ON FANNIE AND FREDDIE'S ROLE 5 YEARS FROM NOW:
"For many of us, we want to get rid of the Full Faith and Credit, even an implied guarantee from the American taxpayers on Fannie and Freddie securitization. But you've got to make sure you have a private MBS, mortgage backed security, market up and working. So picture a see-saw where as Fannie-Freddie's "G" fees go up, when their loan limits may come down. At the same time, we've promulgated the rules here in Congress. We also let the markets understand what is a qualifying loan and make sure that as one comes down, the other is out there and we have a healthy private mortgage market."
SCHWEIKERT ON IF OBAMA ADMINISTRATION AND REPUBLICANS ARE ON THE SAME PAGE:
"I wouldn't say we're on the same page but we are reading from the same principles. To their credit, the White Paper makes it clear we do have a problem and need to move away from this implied guarantee. Now the devil is in the details. How do you build a private mortgage market? And think of it, from when Ma and Pa walk in the door and ask for a loan all the way down to the end where a snippet of a bond is sitting in someone's pension account, what are the rules? And there's dozens of mechanics that have to be put together."
SCHWEIKERT ON IF WHITE HOUSE AND REPUBLICANS CAN AGREE ON FANNIE AND FREDDIE UNWIND:
"I hope so because I'm spending a few hours every day working on this. And it's like a lot of things. As soon as you think you have one solution, you find out there's a half dozen other problems that have to be taken care of. And a lot of this is private mortgage insurance. Is that the way to move forward? Is it covered bonds? What is the way to produce quality mortgage debt that can be securitized that we can have in our investment accounts that will be highly rated and be safe? And I'll make you the argument debt that's been created in the last two years is wonderful. It's good quality debt, good quality mortgage debt because we're doing it on a new basis -- our home values are down so much. But what's the future?"
SCHWEIKERT ON IF IT WILL TAKE 5-7 YEARS TO UNWIND FANNIE AND FREDDIE:
"I think that may be too long. If we're producing the rules and giving a tell to the private markets, I think it probably has to be about half that time."