* US Treasury says to outline GSE reforms early next year
* Treasury eyes swift reform bill implementation-Wolin
* Wolin says reforms won't chase firms to overseas markets
(Adds step toward reform bill passage)
By Al Yoon and David Lawder
NEW YORK, July 15 The U.S. Treasury will not
propose an overhaul of U.S. housing finance until next year as
it concentrates first on implementing landmark financial
reforms, the Treasury's number two official said on Thursday.
U.S.-backed housing finance giants Fannie Mae FNMA.OB and
Freddie Mac FMCC.OB, with their broken business models, are
notoriously absent from the U.S. financial rules overhaul close
to becoming law.
Inclusion of housing finance reform would bog down the
broadest Wall Street reform since the 1930s and delay needed
rule changes on consumer protection, systemic risk controls and
financial derivatives products, the Treasury says. But early
next year, the U.S. will issue a paper outlining proposals and
recommendations, Deputy Treasury Secretary Neal Wolin told the
Securities Industry and Financial Markets Association (SIFMA)
conference in New York.
"We will undertake this work in parallel with the work of
implementing the financial reform bill," Wolin said. "It is
obvious that the housing finance system cannot continue to
operate as it has in the past."
Due to the high stakes in reforming Fannie and Freddie,
whose mortgage losses have cost U.S. taxpayers more than $145
billion since late 2008, Wolin said the Treasury is "wide open
to ideas, to discussion and to collaboration from all
Both Democrats and Republicans agree a reorganisation is
essential. But neither party has come up with a workable plan
to do that without inflicting more harm on the still-suffering
housing market and the broader economy.
For analysis, see [ID:nN15205678].
Treasury has already begun a "rigorous" implementation
planning process for the sweeping financial reform approved by
the U.S. Congress.
"That work cannot be done overnight. It will take time. But
we are prepared to move on to the next stage with speed, with a
strong sense of purpose and with a commitment to ensuring that
our financial system is both safe and vibrant," he said.
The U.S. Senate cast sufficient votes to Thursday to give
final approval on the legislation. [ID:nN15367377].
ALWAYS NEXT YEAR?
Lawmakers for at least a decade have been trying to
overhaul Fannie Mae and Freddie Mac, which expanded rapidly
under a business model that answered to shareholders yet
enjoyed implicit government backing.
"It's always been next year," Randall Guynn, a partner at
Davis Polk & Wardwell, said on a SIFMA panel, in regards to
again kicking housing finance reforms down the road.
Congress has been concerned that fiddling with the housing
finance companies could upset the economic recovery as they and
the Federal Housing Administration support the lion's share of
all funding for U.S. homebuyers. Investors have yet to return
in any significant numbers to the private market for
residential home loans.
Housing finance reform could also have overloaded the wider
Wall Street regulation bill. It has been a sensitive topic for
groups like SIFMA whose Wall Street members face cuts to
profitability should they be forced to tie up capital or reduce
trading. Tim Ryan, SIFMA's president, applauded parts of the
legislation but warned members of a "complicated multiyear
process" where more than a dozen regulators will implement over
Among concerns of some financial firms is a situation where
the U.S. rules are far more onerous than elsewhere in the
world, putting American businesses at a disadvantage. Wolin
said "there is a very substantial overlap" in views between
U.S. regulators and their global counterparts on the core
issues such as capital and derivatives.
This means there will be little space for an investment
bank or other firm to gain an advantage by incorporating in
places where reforms may be more business-friendly, he said.
"I don't see any reason to think that that will happen," he
said in response to a question about U.S. businesses leaving
because of new regulations.
(Editing by Andrew Hay)