After his criticism last month of Republican bills to unwind Fannie Mae and Freddie Mac, the regulator of the two government-sponsored enterprises made clear Wednesday he does not believe the latest round of bills is much better.
Edward DeMarco, acting director of the Federal Housing Finance Agency, returned to the House Financial Services' capital markets subcommittee to weigh in on seven House GOP proposals unveiled last week, including measures to restrict legal fees paid on behalf of GSE employees and subject the mortgage giants to the Freedom of Information Act.
DeMarco, who in March testimony took issue with an earlier round of bills, said Wednesday that some of the most recent proposed reforms were already being undertaken by his agency while others would have "unintended consequences."
For example, he said the bill limiting legal fees could expose GSE personnel to financial ruin. That proposal, by Rep. Randy Neugebauer, R-Texas, would allow taxpayer-funded legal fees for employees only if they met a certain threshold for being reasonable.
"An approach to clarify tests for reasonableness and for monitoring legal expenses has merit, but the implication that employees will not be indemnified nor have funds advanced for their legal protection would expose them to lawsuits that could potentially bankrupt them, even if they are found innocent of any charges," DeMarco said in prepared testimony.
Neugebauer argued the GSEs' policies for financing legal defenses are too open.
"While Fannie and Freddie's bylaws allow for the advancement of 'reasonable' legal fees, there are no criteria for what constitutes reasonable," he said at the hearing.
But DeMarco had other concerns. He said the proposal by Rep. Jason Chaffetz, R-Utah, to require compliance with FOIA requests could impede FHFA efforts to minimize taxpayer losses from the conservatorships.
"They will incur significant operational and compliance costs in establishing and administering a function to respond to such information requests," DeMarco said. "FOIA requests made to the enterprises would also lead directly to added legal administrative burdens on FHFA, as conservator."
With the seven Republican proposals, the lawmakers in the GOP-led House have now unveiled at least 15 bills to clamp down on the GSEs. But none have reached a full vote, and their chances in the Senate would be slim