Johnson-Crapo Side Effect: A Mass Exodus of GSE Employees?
The Senate GSE bill in its current form would create an extremely high risk for Freddie Mac’s core policy functions during the legislation’s proposed five-year wind down of the company, according to commentary from Freddie Chief Executive Don Layton.
In a recent memo to Federal Housing Finance Agency Director Mel Watt, Layton says the housing finance reform legislation from Sens. Tim Johnson, D-SD, and Mike Crapo, R-ID, fails to state clearly that the GSEs’ core policy function must be maintained, and such an omission would create potentially crippling uncertainty among staffers during the transition. “The bill doesn’t just fail to address the problem of employee instability, it significantly exacerbates it,” writes Layton.
The Johnson-Crapo bill sets a five-year timeline to shut down Fannie Mae and Freddie, while creating a new entity, the Federal Mortgage Insurance Corp., to regulate the mortgage market. Layton warns that Freddie staffers “at all levels” would flee during the five-year transition period, citing several provisions of the bill that are detrimental to employees.
“The risk of departures crippling the company’s ability to operate is very real and significant,” he writes. Layton wants lawmakers to make the bill’s language “unequivocally clear” that no GSE employee will lose compensation or benefits earned during conservatorship, receivership or the transition process. For more on the story, see the new edition of Inside The GSEs, now available online.
