This month, the Senate Banking Committee is set to consider a bill to overhaul the mortgage finance system, most notably by getting rid of the government-owned mortgage giants Fannie Mae and Freddie Mac over five years.

That would significantly shift the risks of mortgages, as well as the entire mortgage market, away from the government and toward the private sector. And with a wealth of lobbying cash as well as connections with the bill’s crafters, the financial sector (including the insurance and banking industries) could play a serious role in shaping how those risks and rewards turn out in the final legislation.

The proposed measure, from Senate Banking Committee chairman Tim Johnson (D-S.D.) and ranking member Mike Crapo (R-Idaho), would extinguish Fannie and Freddie and create a body called the Federal Mortgage Insurance Corporation to regulate a new insurance system for mortgage bonds. The new system would make lenders accountable for the first 10 percent of potential losses on mortgage bonds, with the government liable for the rest.

Lobbying data isn’t yet available on the new bill, but the banking and insurance industries have already lobbied hard on many of the provisions it contains. The framework for Johnson and Crapo’s proposal is a bill introduced last summer by Sens. Bob Corker (R-Tenn.) and Mark Warner (D-Va.). (Changes, include giving the FMIC greater regulatory powers and changing some requirements for single family housing.)

Seven of the 10 companies that listed last year’s bill most frequently on lobbying disclosure reports were in the banking, real estate and insurance industries, which generally support getting rid of Fannie and Freddie. The groups include Regions Financial, which listed the bill on seven reports, and the American Bankers Association, which listed it on five.

The ABA has long voiced its support for nixing government-sponsored entities like Fannie and Freddie. For that reason, the group has already supported parts of the Johnson-Crapo bill, saying in a statement that the bill is an “important step forward,” though the group still wants to see less government regulation in the market. The ABA and its affiliates have the cash to make an impact on the final legislation, having spent $8.8 million on lobbying in 2013. Other commercial banks that lobbied on the bill were JPMorgan Chase and Citigroup, who spent about $5.5 million and $5.6 million on lobbying in 2013, respectively.

Organizations that are against the legislation tend to have far less political capital. They include the NAACP and the Leadership Conference on Civil Rights, which came out in late March with a joint letter opposing the legislation, along with five other organizations. The groups spent more than $500,000 and $800,000 respectively on lobbying in 2013.

Lobbyist connections

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Potentially even more important is the presence of two prominent lobbyists for banking and real estate organizations: Dwight Fettig and John Anderson.

Fettig and Anderson have worked at various Washington institutions (including, in Fettig’s case, Freddie Mac), but what’s most noteworthy when it comes to this legislation are their connections with Johnson and Crapo, the crafters of the newer bill. Fettig worked for Johnson for more than fifteen years, first as his legislative director from 1988 to 2002 and then as the staff director of the Senate Banking Committee when Johnson was chairman, from 2010 to 2013. Anderson spent years as a senior policy advisor for Crapo, including serving as the senator’s liaison to the Senate Banking Committee.

Both Fettig and Anderson weighed in heavily on the 2013 Corker-Warner bill, with many of their clients in the commercial banking and insurance industries.

Fettig lobbied on the bill for groups such as the American Bankers Association and the global investment firm Jefferies & Co. Anderson, meanwhile, lobbied for financial bodies like Citigroup, Genworth Financial and Nomura Holdings, among others.

With both lobbyists having ties to the financial sector as well as close connections with Crapo and Johnson, the commercial banking and insurance industries could have a marked advantage in getting heard when the legislation is considered and brought to a vote; in fact, they likely have played a not insignificant role in shaping the bill.

For both Crapo and Johnson, the finance, insurance and real estate sector has been the biggest source of campaign cash over their careers. The employees and PAC of Citigroup were the largest donor to Johnson over his career, while JPMorgan Chase has given the most to Crapo.

Image: Sen. Mike Crapo at a Senate Banking Committee Hearing (Flickr/American Insurance Association).

Follow Robbie on Twitter at @robbiefeinberg



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