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62 If it hurts taxpayers and it torpedoes government agencies that bring in money, why do it? at's the stance taken by public watchdogs and others that oppose the recently proposed Johnson- Crapo bill, which looks to wind down the GSEs and replace them with a new government agency. e GSEs are expected to bring in $181 billion over the next 10 years, but some detractors say it will cost taxpayers $19 billion—making it another burden on the American workforce in a still soft economy. e Office of Management and Budget (OMB) sees the GSEs as a moneymaker, whereas the Congressional Budget Office (CBO), which reports to Congress, views them otherwise. While many agree that the housing finance system is in need of reform, how it should happen is the point of contention. e bipartisan bill has already been approved by President Obama but could hit a snag in Congress, having already missed its chance to move forward before the spring recess in April. While there's no hard deadline, the vote may come up sooner than later. "ere's a lot to risk and not a lot to gain from reform," said Collingwood Group chairman Tim Rood, former director and principal of Fannie Mae's e-business division. "Sooner or later, that will get found out and the urgency on the Hill or at least the appearances of urgency on the Hill will go away. You've got to remember that the beautiful thing about the GSEs from a political standpoint is that the common theme—whether you're Republican or Democrat—is negative against the GSEs." To Rood, Fannie Mae and Freddie Mac are now a sustainable and viable option to generate enough income to dent the national deficit. But what's driving the conversation are the eyes gazing at the 2016 election season. "It's one of these great polarizing topics that legislators can go out there and keep talking about and get everybody else spun up and energize their base for different reasons," Rood said. "I wouldn't call the reform insincere but the timing is convenient during election year and it's headline- grabbing stuff." Although not the only bill on the issue out there, the most likely housing reform measure comes from Senate Banking Committee leaders Tim Johnson (D-South Dakota) and Mike Crapo (R-Idaho) and is very similar to the bill Sens. Bob Corker (R-Tennessee) and Mark Warner (D-Virginia) released last June. is may have to do with the fact that both bills were written with the help of mortgage trader Michael Bright, who was with Countrywide and Wachovia until the financial crisis and who has worked as a senior financial adviser in Corker's office. Like other introduced efforts, the Johnson- Crapo legislation was created to address the extent of government guarantees against mortgage lending losses and the role of the federal government in promoting affordable housing. In Johnson-Crapo, the Federal Mortgage Insurance Corporation (FMIC) would become the new federal regulator of the mortgage industry, with the current regulator of the GSEs, the Federal Housing Finance Agency (FHFA), transitioning into an independent office within FMIC. FMIC would have a taxpayer guarantee as opposed to Fannie and Freddie's federal backing. What has some lawmakers scratching their heads is a 10 percent first loss provision, where FMIC helps only after losses exceed the amount put up by private investors. rough this risk- sharing mechanism, private investors would price their own risk knowing their losses are capped, which would incite more risk taking. e plan spans five years, at the end of which FMIC would be required to have a new securitization platform running and be approving a sufficient number of guarantors, aggregators, and insurers. M A R K E T P U L S E / P A U L S A L F E N Both the Johnson-Crapo bill and a new bill from Maxine Waters surface to plenty of detractors. LITTLE PROMISE OF PASSING

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