Scott Garrett

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Speaker, the duty of promoting, developing and preserving the economic environment and quality of life of a community is a personal contribution to the democracy that has made America the great country it is today. Leaders are looked upon for advice, ideas and stability to sustain the growth and security of our communities. In recognition of the outstanding dedication and personal leadership to a community, I am pleased to extend my warmest commendation to Mr. Charles O. Wright for his services to the Oakland Chamber of Commerce in Oakland, New Jersey. For the last 25 years, businesses as well as prospective college students in Oakland, NJ have flourished on his behalf. In 1981, Mr. Wright was selected to join the Chamber's Board of Directors. Soon after, he served as Vice President and Treasurer. In 1984, as President of the Oakland Chamber of Commerce, he established the Chamber Scholarship, benefiting students of the community. His respected leadership qualities resulted in his Chairmanship of four Standing Committees: Scholarship, Membership, Election and Technology. Mr. Wright has enjoyed a career focused on providing service and intellect to the Borough of Oakland, NJ. The community will thrive for years to come because of his leadership and dedication to society. It is therefore with great honor that I offer my sincerest appreciation and congratulations to Mr. Charles O. Wright for his committed service to the Oakland Chamber of Commerce and I wish him a future filled with continued success.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Madam Chairman, I offer an amendment.

Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 2 minutes. My amendment would strike the language in the bill that raises the conforming loan limits for certain parts of the United States. H.R. 1461 would raise by 50 percent the maximum size mortgage Fannie Mae and Freddie Mac could buy. This language hurts the very basic functions of GSEs to provide liquidity and help lower-income home buyers. While the GSEs are chartered to operate in every district across the country, their effectiveness in serving low-income borrowers has been seriously hindered because they focus instead on bigger and bigger loans to higher and higher-income borrowers. Presently, Fannie and Freddie can buy first mortgages on single-family houses up to $359,000. That limit is the so-called ``conforming loan limit,'' and it rises every year. Next year it will go up to $400,000. But with the bill now, it will go up to $600,000 in 2006. A home buyer would need an income of almost $200,000 to buy that home. Is that what Fannie Mae was intended to help? According to a study by the Federal Reserve published last January, the interest rate difference between a conforming loan and a jumbo loan fluctuates between .15 percent and .18 percent, most of which is pure profit for Fannie Mae. Based on the current interest rate environment, this means at best Fannie is going to lower monthly costs by simply $60 for someone buying that $200,000 loan who is now paying $3,300 or so a month in mortgage payments. The problem for Fannie is this extension into jumbo loans for higher- income families and forgetting about their mission to help lower-income families comes with a an added price, a risk to their balance sheets. Chairman Greenspan and Secretary Snow have consistently raised their concerns about the systemic risks that the size of Fannie and Freddie's portfolios pose to our Nation's housing market. And if we allow them now to participate in the jumbo loan market as well, they will only continue to further exacerbate this dire situation. We should ask, why was it even proposed that Fannie get this added power to help high-income home buyers? Was there a problem that needed to be fixed? No such evidence was ever presented at any of the committee hearings. The private sector has adequate sources of funding for loans that are above the conforming limits. An active private secondary market for larger mortgage loans that did not exist when the enterprises were set up is now active to supplement these sources of funding, and allowing Fannie to take on higher costs in jumbo loans only takes valuable time and resources away from their enterprises. Madam Chairman, I reserve the balance of my time.

Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 1 minute. We must remember what the original focus of the GSEs was when they were initially chartered by this Congress, they were to do two things, and that is to provide liquidity to the marketplace and also to help provide for facilitating low-income buyers coming into the marketplace. It is already set up in the law that the amount that GSEs can lend can go up every year. As it is right now, it stands at $359,000. It is set to go up to $400,000 for next year, in 2006. As the bill was amended in committee, it comes out now that that will go up by 50 percent. I ask the question, how would we define somebody who is about to buy a $600,000 home? That individual would have to be making an income of around $200,000. Even if they are firemen, policemen, teachers, who have you, they would still need an income of $200,000 in order to buy a home at $600,000. That was not the intent of GSEs. The intent was to help the low- income market to get their homes. By allowing the GSEs to get into this market, what we are doing is distracting them from their purpose and hurting those very people that they were intended to help: low-income people, whether they are in New Jersey or California or other high- interest-rate States, to be able to buy their first time. Madam Chairman, I reserve the balance of my time.

Mr. GARRETT of New Jersey. Madam Chairman, I yield myself 20 seconds. Madam Chairman, the assertion that this would be devastating to the market runs contrary to the facts before the committee. There was no evidence whatsoever presented to the committee to say that the system in place in States such as New Jersey or California or elsewhere are in need of GSEs to come in to increase their conforming limits by 50 percent. There is already an additional market out there that allows for people to buy jumbo loans; and there are a number of different variations, adjustable rate loans, that allow people who are in the upper brackets and making $200,000 to be able to afford and to buy these mortgages.

Mr. GARRETT of New Jersey. Madam Chairman, I yield myself the balance of my time. Madam Chairman, as stated, the purpose of Fannie Mae and Freddie Mac, the GSEs, was to provide liquidity difficult to the market and allow first-time homeowners to get into the market in the first place. However, we want to define who those people are, and I think some things we can agree on: those people who are making $200,000 and who want to expand and go up to larger houses should not be the ones that we define as lower-income individuals. The statistics also show that came before our committee that even if we put this into place, the differential on mortgage rates would account for around $60 to $70 per mortgage. So if you are buying that $600,000 house and paying $3,000 or $3,300 a month, even if this bill were to pass, you would only see your savings of around $60 or $70. I think the focus of Congress should be what it was when Fannie and Freddie were first set up, and that is to help those people get into their very first home. We can do that best by limiting their function to what it was prior to this amendment in the committee, and that is to focus on first-time home buyers in every State of the Union to be able to buy that first home, people of low and modest means who need the assistance of a government-backed program such as Fannie and Freddie to be able to know that there is a program there that allows them to get into that loan. We can allow the other market, which is already in place, which has been functioning properly, where there is no evidence whatsoever to come before our committee that says there was a need to expand in this area, to continue to provide the financing for people who are at the upper-income levels of $200,000 and the like to be able to buy those homes. Madam Chairman, I believe the best thing in mind is to make sure we remain in place the system that allows first-time home buyers the ability to get into their homes. By voting ``yes'' on this amendment, we be will be able to do that.

Mr. GARRETT of New Jersey. Mr. Chairman, I rise today to compliment both Chairman Baker and Chairman Oxley for their work in order to put together a bill that the main purpose which is to regulate and strengthen the regulation of Fannie Mae and Freddie Mac. If anyone here questions the need for additional remedies such as regulations, all we have to do is look at a brief history going back a couple of years of these two entities. Back in January of 2003, Freddie Mac issued a press release and stated it will issue an unaudited statement of earnings for the year 2002 and restate accounting results for prior years. November of the next year, November 2003, Freddie issues a restatement of past accounting results for the year 2000, 2001, 2002, and revises its net earnings upwards by $4.4 billion that they were off in their records. September of 2004, OFHEO makes public a report highly critical of accounting methods of Fannie Mae. November of 2004, Fannie announces that it is unable again to file a third-quarter earning statement because its auditor, KPMG, refused to sign off on the accounting results. December of 2004, the Securities and Exchange Commission, the SEC, issues a statement supporting OFHEO's report and orders Fannie to restate its financial results. Again, in December of 2004, the Fannie CEO Franklin Raines and CFO Tim Howard have to resign from those entities. Finally, in June of 2005, after 3 years, finally Freddie issues its first audited annual report since the year 2002. And now we are here in October, and we look back about a week or so ago, and press reports are out again suggesting that investigators have uncovered again new accounting violations of Fannie Mae, possibly including overvalued assets, underreported credit losses, and misused tax credits. Mr. Chairman, if there was ever a need of entities that need additional regulation, it is Fannie Mae and Freddie Mac. If there are ever two entities that need to be limited in their size, it is these two entities. If there were every two entities that need not grow, it is these two entities. I applaud the chairmen for their work to regulate them.

Mr. GARRETT of New Jersey. Madam Chairman, I demand a recorded vote.

Mr. GARRETT of New Jersey. Mr. Chairman, I rise in support of this legislation, which strengthens the language with regard to portfolios and GSEs. The GSEs claim that they are shock absorbers in the system. One of the main reasons that Fannie and Freddie claim they should not have their portfolios limited is that they provide a stable means of support for the residential finance markets at times of crisis. Fannie's CEO, Dan Mudd, testified that ``our mortgage portfolio allows us to play a shock-absorbing function for the finance system during times of potential difficulty.'' This week, Freddie's president, Eugene McQuade, was quoted as saying that the enterprises provided a source of stability to the mortgage finance market after the September 11 terrorist attacks. This is a nice thought, Mr. Chairman. However, their statements are not true. If you look at Fannie's purchases for its portfolio during every month of 2001, you will notice that its purchases in September of 2001, of that year, were the lowest level of anytime during that year. Fannie might argue that they acted as a shock absorber not by buying mortgages and MBS, but by committing to buy in succeeding months. Mr. Chairman, I will conclude by saying that we should support these significant portfolio limitations in order to make sure that GSEs are able to be reined in and not become what they have said they are and go out of their range of portfolio.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Speaker, I rise tonight to discuss an important issue that could, as we know, come before the House as early as next week, and that is, the regulation of GSEs, specifically Fannie Mae and Freddie Mac, and the impact they have on homeowners or people who want to buy a new home, and a tax that it may place upon them and the risk that places to the mortgage market in this country. Fannie Mae and Freddie Mac were chartered by Congress with the main purpose of creating a liquid secondary mortgage market in this country and also providing essential affordable housing for lower-income families. To help them in this effort, the GSEs have a number of benefits, including exemption from State and local taxes and an ability to borrow at a discounted rate due to the implied government backing they have. Beginning in the early 1990s, Fannie and Freddie held a combined $12 billion, that is, 5 percent, of the single-family home mortgage market in their portfolio; but over the last 15 years, this number has grown to over $1.5 trillion, about. I say ``about'' because I cannot give you a more specific number, because it has been years, if not longer, since anyone has known precisely what is in their books. Fannie and Freddie realized that by keeping a portfolio of the larger portion of the mortgages they purchased and by buying back much of the MBS they issued, they could make five times as much spread as they could by simply securitizing the mortgages that they bought and selling the resulting MBS to third parties. However, by keeping a large amount of mortgages and MBS on their portfolio, Fannie and Freddie are greatly increasing their interest rate and prepayment risk, which leaves them very susceptible to interest rate changes. To hedge against these possible interest rate changes, Fannie and Freddie use various types of derivatives to shift much of the interest rates to derivative counterparties. Hedging of this nature greatly concentrates interest-rate risk in Fannie and Freddie and a handful of large banks and investment firms, and this concentration has created what is known as a systemic risk, which Chairman Greenspan has warned about. The best way to reduce the systemic risk for the economy is by limiting the amount of mortgages that Fannie and Freddie can hold in their own portfolio. Now, I commend the chairmen of the committee, the gentleman from Ohio (Chairman Oxley) and the gentleman from Louisiana (Chairman Baker), in working to draft legislation to create a new world class regulator to oversee Fannie and Freddie. However, I believe that the House bill does not go far enough. See, the House bill gives a new regulator the authority to dispose of any new assets or liabilities of the enterprises if the Director determines such action is consistent with safe purposes. Now, while this is a step in the right direction, I believe that stronger language is definitely necessary. I worry that a new regulator, without specific congressional direction to reduce the size of portfolios of the GSEs, will face constant political pressures from the GSEs, thus putting the possible problems that result on the backs of American taxpayers. Now, some argue that if Fannie and Freddie portfolios are curtailed, they will not be able to meet their affordable housing goals. But this is not the case. As the former head of OFHEO noted just last week, ``The amount of time and resources that the enterprises must dedicate to managing the risks associated with their portfolios is very substantial, and it dwarfs any marginal benefit to their affordable housing mission. In addition, the recent scandals at both companies illustrate the problems they can get themselves into as they try to manage this volatility associated with very large portfolios.'' Limiting the portfolio growth is the number one priority of the administration in addressing GSE reform. Chairman Greenspan, Secretary Snow, Secretary Jackson and others have all spoken out on the need to rein in these large portfolios that exist solely to increase the profits for Fannie and Freddie executives and their shareholders. In a speech last spring to the Federal Reserve Bank of Atlanta, Chairman Greenspan discussed the GSEs' ability to securitize mortgages and the benefits that it would have on the housing market and the health of the entire economy. He stated, ``The method of GSE financing most consistent with our mission is to securitize assets first and to hold in their portfolios only those assets that are very difficult or unduly expensive to securitize.'' And here is the key part: ``Without the needed restrictions on the size of the GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States, a key ingredient of support for housing.'' So in conclusion, Mr. Speaker, legislation that is coming before the House next week dealing with GSE, Fannie and Freddie reform is a good first step, but is not in the current format something that we should support. It will result in a tax on the American taxpayer, it will result in a tax on the American who is trying to buy his first house, and it will add risk to the already risky mortgage market in this country.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Speaker, the cost to buy a new home is about to go up in America. Why is that? Because as soon as next week, Congress is about to vote on placing a new tax on homeownership, a tax that may well raise the cost for the average American who wants to buy their new home. Years ago, Congress set up Fannie Mae and Freddie Mac with the noble intent to add liquidity to the marketplace and help home buyers. But in an about-face, Congress is about to impose a new tax and at the same time fail to address an inherent flaw in the current system. Mr. Speaker, legislation before the House would allow Fannie Mae and Freddie Mac to continue to rack up debt on their balance sheets with no limits. These are the same organizations that have been wracked with financial accounting scandals, may have 1.5 to $1.7 trillion on their balance sheets right now. I say ``may'' because no one can get a clear financial picture from these entities. Alan Greenspan has testified to this problem repeatedly, noting that without restriction on the size of the GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States. American homeowners deserve better. We need to help them and not hurt them.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Speaker, I ask unanimous consent to claim my time at this point.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Madam Speaker, I rise today to discuss an issue that may come before the floor of this House next week. It is the regulations of GSEs, Fannie Mae and Freddie Mac. These were institutions that were created by Congress with the main purpose of providing liquidity in the mortgage market and also to provide affordable housing for lower income families. Unfortunately, over the years they have left their mark, and they have been plagued by multiple accounting scandals. I commend the chairmen, Chairmen Oxley and Baker, for what they are doing, drafting legislation to address it; but unfortunately the bill does not go far enough. The crux of the problem is that there is no limit to the size of their portfolio, their balance sheets, the amount of debt they have. Right now it is around $1.5 trillion, $1.7 trillion in debt on their financial sheets. A failure in the system would mean that the savings and loan scandals of a few years ago would pale in comparison. I will conclude by quoting Allen Greenspan who testified that without restrictions on the size of the GSE balance sheets, we put at risk our ability to preserve safe and sound financial markets in the United States. We must do more to regulate and rein in our GSEs.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Madam Speaker, I rise today to honor the millions of Americans of German heritage and their ancestors who emigrated from their native lands to come to the shores of this country. The first German American Day was declared by Ronald Reagan back in 1983 to commemorate the 300th anniversary of the first group of German- speaking settlers who arrived in the American colonies. German settlers and immigrants have played a vital role in our Nation's history since its very beginning. Great American icons, too, people like Babe Ruth, Lou Gehrig, and Casey Stengel in sports, and John Steinbeck, Kurt Vonnegut, and the inimitable Doctor Seuss in literature claim German heritage. Madam Speaker, I urge the House to pay tribute to this Great German American Heritage Month, to the many Americans of German descent who continue to contribute to the vitality of my State of New Jersey and to these United States of America.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. The work of educating our youth is one of the highest callings to which an individual may aspire. The values and information imparted to the minds of our children remain with them throughout their lives helping to guide their decisions and consequently, the directions of their families, communities, state, and our nation. In recognition of the outstanding dedication of one man to this noble calling, I am pleased to extend my warmest commendation to Mr. Bruce De Young on the occasion of his retirement as Superintendent of Schools in the Ramsey, New Jersey Public School District. Since 1992, Mr. De Young has served in the position of Superintendent of Schools, yet his dedication to education extends over many more years. Indeed, Mr. De Young has devoted thirty-six years to the field of education. From his position as Mathematics Supervisor for the Ramsey Public School District, to his tenure as Assistant Superintendent for Curriculum and Instruction, through his present position of Superintendent, Mr. De Young has enjoyed a career focused on providing the best education to his students. Mr. De Young's contribution, however, reaches even beyond the classroom. As a member of the Legislative Committee of the New Jersey Association of School Administrators and a member of the Bergen County Association of School Administrators, the Association for Supervisors and Curriculum Development, and the National Council of Teachers of Mathematics, Mr. De Young has been willing to share his experience and knowledge for the purpose of bettering educational quality for countless students, both in New Jersey and across this great nation. Moreover, through his willingness to mentor other Superintendents as they travel the path to permanent certification, Mr. De Young has ensured that his contribution to education will last not only throughout his career but also well into the future. It is, therefore, with great honor and humility that I offer my sincerest appreciation and congratulations to Mr. De Young on the occasion of his retirement and I wish him a future filled with continued success.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Chairman, I rise today to speak in favor of the amendment introduced by my friend, the gentleman from Texas (Mr. Hensarling), that would encourage fiscal responsibility by the U.S. Postal Service. I, along with others, support the Postal Service that is staffed by thousands of resourceful and hard-working individuals who I believe have the ability, by themselves, to adapt and create a smoothly functioning postal system that can really be a world leader for us all. I support the Postal Service and the valuable contribution that it provides to our economy, and the common-sense bill before us will move the U.S. Postal Service in the right direction so it will no longer be a drain on the U.S. taxpayer. This amendment will encourage the Postal Service to move forward, to take responsibility for its own liabilities, just as other large corporations have to do. Recently Fortune Magazine ranked the Postal Service as the 44th largest corporation in the world and looked at the many assets that they have. Unfortunately, the Postal Service has not taken advantage of those assets and its potential. Instead, it has not moved in the direction of other industrialized nations in providing us with a mail system of innovation, financial soundness, and quality of services. That study also looked at nine different postal services, two private and seven from industrial nations, and in seven out of those nine categories found the U.S. Postal Service ranked last. I believe that the Hensarling amendment will change that. It will move the Postal Service of this country in the right direction, make it more efficient, and, most importantly, take the burden off the U.S. taxpayer. For that reason, Mr. Chairman, I encourage my colleagues to support the gentleman from Texas in his amendment.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Madam Speaker, I also humbly rise this morning as we support a bill to rename the post office in West Milford, New Jersey, up in my district, after Lance Corporal Brian P. Parrello who was killed in action, as we say, in Iraq earlier this year, in January. He was an honorable defender of liberty, and he deserves our gratitude and respect. Brian joins that long list of our country's heroes who have made the ultimate sacrifice so that each and every one of us can live free. After the attacks on September 11, 2001, Brian proudly joined the United States Marine Corps where he was assigned to the Second Marine Expeditionary Force in North Carolina. In Iraq, Brian served in the Marine's swift boat unit where he patrolled the Tigris and Euphrates rivers. As indicated earlier, back in West Milford High School, he served on both the football and the hockey teams. His teachers and his coaches and his peers called him a real leader, a real role model, someone who always gave 150 percent to everything that he did, a guy with a big heart who led by example. That is why I am proud to have introduced the legislation in this House to rename the post office in West Milford after Brian. I am sure that Brian would have been proud to see the Iraqi people vote in the fair and free elections this past January. Brian gave all he could to help secure those freedoms. The war on terror is global in nature, and Brian fought in Iraq so that we may end the scourge of radical Islam and keep terrorists from attacking our homeland and freedom-loving people around the entire world. Now, we can never fully express our gratitude for his sacrifice, for the freedom and the security to our Nation; but I am proud that we can leave a lasting memorial so that his heroic actions can be remembered in this country for now and future generations as well. Today, we also remember his family, and we send them our prayers and our comfort as well.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Chairman, I offer an amendment.

Mr. GARRETT of New Jersey. Mr. Chairman, I demand a recorded vote.

Mr. GARRETT of New Jersey. Mr. Chairman, I yield myself such time as I may consume. I will just close by addressing the comment by the chairman, and I appreciate the chairman's remarks. This decision of the Supreme Court will continue to be respected by this House and by the people of New London, Connecticut and the State of Connecticut as well. This legislation simply sees to it that the taxpayers of that community and the taxpayers and the citizens of the United States of America will not subsidize those private developers in that instance. Mr. Chairman, I yield back the balance of my time.

Mr. GARRETT of New Jersey. Mr. Chairman, I yield such time as he may consume to the gentleman from Minnesota (Mr. Kennedy).

Mr. GARRETT of New Jersey. Mr. Chairman, I yield myself 2 minutes. I rise today to offer an amendment to help protect one of America's most cherished rights of an American, to own their own home, to own their own property. Last week the U.S. Supreme Court, by the slimmest of margins, ruled that a local government can come in and seize people's homes, seize their small businesses against their will for other private economic development. This decision now will allow cities to come in and bulldoze their house, bulldoze their business, tear it all down just so that they can build a shopping center owned by somebody else. The Garrett-Kennedy amendment seeks to prohibit any funds made available under this act from being used to enforce the judgment of the U.S. Supreme Court in the case of Kelo v. New London. The practical effect of this will mean that we will prohibit Federal dollars from going out to be used for support purposes, infrastructure and the like, so that a private developer will benefit from the loss of these people's homes. It will mean that a bus stop will not be able to be built on what was once their home in order that a commercial building can be built there instead. It will prohibit Federal dollars from building a new entrance ramp or an exit ramp in partnership with that developer so that that developer can build a strip mall there instead. I believe that if a private developer is going to push someone off their land, out of their house, and destroy that house or small business, then he should foot the bill for any infrastructure that he is going to build. I want to ensure that the Federal Government does not contribute in any way financially to this terrible Supreme Court decision. Mr. Chairman, I reserve the balance of my time.

Mr. GARRETT of New Jersey

Mr. GARRETT of New Jersey. Mr. Chairman, I yield myself such time as I may consume. I just want to take this time to thank the chairman for his work this time, as well as in the past, to visit this issue through the conference process. So I thank the gentleman for accepting this amendment. Mr. Chairman, I yield back the balance of my time.

Mr. GARRETT of New Jersey. Mr. Chairman, I yield myself such time as I may consume. Members from either side of the aisle may disagree exactly how we got to the point we are, in general, and that is that our deficit is too high and that we spend too much money. But I think we can both agree on one thing, that we should work together to try to solve that problem. I am offering, therefore, today what I consider is a commonsense approach to deal with a spending abuse. It is an approach that this House agreed to in similar legislation in the past. In essence, it is a limitation on the number of Federal employees that may go overseas to international conferences. This has grown out of a growing tendency in the past by various administrations for sending various numbers to international conferences, spending upwards of millions of dollars. Back in 2004, for example, over 130 Federal employees attended an AIDS conference in Thailand. Instead of spending all this money on sending personnel over there, instead we could have used it, in fact, to provide AIDS prevention and AIDS medicine; 216,000 newborns in Africa alone. So this legislation grows out of a common problem in the past. Just sending too many people overseas, using taxpayers' dollars to do so. Earlier in this session we had similar language which was approved by this House in the Interior bill, and I would encourage my colleagues on both sides of the aisle to approve it now in this legislation as well. Mr. Chairman, I reserve the balance of my time.

Mr. GARRETT of New Jersey. Mr. Chairman, I offer an amendment.