(Clarification: The headline is based on my construction of the conservator's powers under HERA. The dialogue below simply quashes the notion that release from conservatorship would be at odds with Congressional intent.)
From The Congressional Record, December 18, 2015 S8850-S8851:
Mr. Sherrod BROWN. Madam President, today I wish to discuss section 702 in division O of the Omnibus appropriations bill. It is a provision that would prohibit the Treasury Department from selling, transferring or otherwise disposing of the senior preferred shares of Fannie Mae and Freddie Mac for 2 years.
In 2008, Treasury Secretary Hank Paulson and Federal Housing Finance Agency Director James Lockhart placed Fannie Mae and Freddie Mac into conservatorship and created an agreement that gave the Treasury Department senior preferred shares in both entities. Since that time, the GSEs helped stabilize the housing market by ensuring that families had access to 30-year fixed-rate mortgages at reasonable rates and lenders had access to a functioning secondary market. While the government was initially forced to inject $188 billion into shoring up these two agencies, it has since collected $241 billion. Taxpayers have thus earned $53 billion during the conservatorship.
Mr. Charles SCHUMER. Madam President, will the Senator yield for a question? I am concerned that someone could read the provision as limiting a future administration’s authority to end the conservatorship after the 2-year prohibition absent congressional action. Does the provision prohibit a future administration from taking any action after January 1, 2018, if it is in the best interest of the housing market, taxpayers or the broader economy?
Mr. BROWN. I will say to my colleague from New York that it does not. That is not the effect of the language. Any number of decisions could be made after that date, when a new Congress and a new President will be in place. Nor does this provision have any effect on the court cases and settlements currently underway challenging the validity of the third amendment. As the Senator from Tennessee said yesterday, ‘‘this legislation does not prejudice’’ any of those cases.
Mr. Harry REID. I associate myself with the comments of the Senator from Ohio, Mr. BROWN. If it turns out to be in the best interest of borrowers, the economy or to protect taxpayers, the next administration could elect to end the conservatorship on January 2, 2018. This is the view of the Treasury Department as well. I would like to submit a letter written to me on this issue that states that the provision binds the Treasury only until January 1, 2018, and has no effect after that.
The agreement for this language to be included in the omnibus was that the prohibition would sunset after 2 years and not create a perpetual con-servatorship. As then-Secretary Paulson described, conservatorship was meant to be a ‘‘time out’’ not an indefinite state of being.
Madam President, I ask unanimous consent that the Treasury letter be printed in the RECORD at the conclu- sion of the remarks by Senator BROWN.
Mr. BROWN. Madam President, I thank the Majority Leader. The FHFA and Treasury Department could have placed the GSEs into receivership if the intent was to liquidate them. The purpose of a conservatorship is to preserve and conserve the assets of the entities in conservatorship until they are in a safe and solvent condition as determined by their regulator.
There being no objection, the material was ordered to be printed in the RECORD, as follows:
DEPARTMENT OF THE TREASURY,
Washington, DC, December 17, 2015.
Hon. HARRY REID,
Democratic Leader, U.S. Senate, Washington, DC.
DEAR MR. LEADER: In response to your request for our view, the Treasury Department interprets the language of Section 702 of Division O of the Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2016, to mean that subsection (b) imposes a prohibition that is binding until January 1, 2018. It would not be binding after that date.
Assistant Secretary for Legislative Affairs.