This vote was on whether to allow to go forward an amendment by Mike Crapo, R-Idaho, that would have required that Fannie Mae and Freddie Mac be placed on the federal government’s balance sheets until they are removed from under conservatorship. Conservatorship is a legal term that refers to a situation where a business entity is under the control of some other entity, usually as a result of a court order. In this case, Fannie Mae and Freddie Mac, two government-sponsored enterprises, are under the direct control of the federal government as its conservator, as a result of the 2008 financial meltdown. This was done because both of them were weighed down by so much debt that they could have defaulted, which would have had even more disastrous consequences for the U.S. housing market.
The motion was made to a bill that aims to close gaps in financial regulations, strengthen oversight of consumer lending and more closely oversee exotic financial instruments.
After Crapo offered his amendment, Chris Dodd, D-Conn., attempted to defeat it with a parliamentary maneuver, arguing that it violates the Senate’s budget rules. Crapo then made a separate motion to waive the rules in this case, which is what this vote was on.
Crapo said the purpose of his amendment is “to show the American people the true picture of how much our national debt has increased as a result of the bailout of these two institutions.” He noted that the former director of the Congressional Budget Office under George Bush, Douglas Elmendorf, said that their current status as in conservatorship makes them government entities that should be included in the budget.
“What is the Director saying? He is saying that since the U.S. Government has now taken over control and management of Fannie Mae and Freddie Mac, and the taxpayer is on the hook for all of their debts and excesses, we ought to put it on budget and show the American people what is happening to our debt as a result of it, instead of using the creative accounting that we see here in Washington all the time, where we mount up spending and debt and figure out ways to keep it from showing up in the national debt or in the calculations of our spending,” Crapo said. He said at the end of 2009 the two entities held about $1.6 trillion in debt.
Dodd said though he has a “tremendously high regard” for Crapo, he disagrees with the amendment. He noted that earlier attempts to completely end the conservatorship for Fannie and Freddie failed because they offered no alternatives with which to replace them if they defaulted.
“The Senate has spoken on the importance of addressing the issue. My colleague from New Hampshire said it well when we were debating whether to include this. As he pointed out, this was so complex an issue, no one really had an alternative idea as to how to come up with a housing financing system, and to include one in this bill would have been difficult,” Dodd said.
By a vote of 47-46, the motion to waive the rules was rejected. Though more voted yes than no, this particular type of vote has to have 60 in order to be considered passed. Every Republican present voted to waive the rules. Of Democrats present, seven voted to waive the rules and 44 voted against (including the most progressive members). The end result is that the motion to waive the rules failed, and an amendment that would have counted debt of Fannie Mae and Freddie Mac toward the federal budget was defeated with a parliamentary motion.