Letter: Legislators going about financial reform the wrong way

Louisiana is finally beginning a slow recovery from the housing crisis of a few years ago. Unfortunately, just as things start to improve, some elected officials in Washington, D.C. are pushing legislation that could have a detrimental effect on that upswing.

Proposed legislation by U.S. Sens. Tim Johnson, D-N.D., and Mike Crapo, R-Idaho, with the Johnson-Crapo Bill, is well-intended to offer reform to the two government-sponsored enterprises, Fannie Mae and Freddie Mac; and agreed, some manner of reform is probably a good thing.

However, this plan replaces them with a massive new federal entity called the Federal Mortgage Insurance Corp. That new structure would explicitly back mortgages, and its design will, most likely, increase fees and monthly payments for any new home purchaser due to new bank fees. It also could put taxpayers on the hook for $5 trillion in liabilities.

Almost worse than the effect on future home-building, the Johnson-Crapo Bill would wind down Fannie and Freddie over five years and wipe out the funds of their shareholders in the process.

Since January 2013, the U.S. Treasury has been taking 100 percent of the profits of Fannie and Freddie, money that belongs to stockholders.

The new legislation does nothing to stop this taking and in fact, codifies it. The stop-gap money previously advanced by the Treasury has been repaid, yet the government is still sweeping funds. A group of like-thinking investors has been formed, Investors Unite, and we are outraged that investors are being treated in such a manner by the government.

Taxpayers, in general, and shareholders, in particular, should be very concerned about the intent of this legislation and its possible precedent.

It is my hope that our senatorial delegation will work to develop some other manner of reform for the two government-sponsored enterprises, one that respects the rights of shareholders while still moving toward housing reform.

Michael A. Mitternight

president, Factory Service Agency

Metairie