Statement of Administration Policy: H.R. 5576 - Omnibus Banking and Housing Bill

(House)
(St Germain (D) Rhode Island)

The Administration supports legislation to recapitalize the Federal Savings and Loan Insurance Corporation and to provide additional authorities for the regulatory agencies to assist troubled depository institutions. The Administration has consistently urged Congress to protect our Nation's depositors by acting expeditiously on this legislation without amendments, which may at this late date impede its progress and prevent its enactment. In this connection, the Administration strongly opposes the unacceptable housing provisions of H.R. 1.

If the provisions of H.R. 1 were to reach the President's desk without substantial change to address the concerns raised below, his senior advisors would recommend disapproval.

The Administration strongly opposes any legislation that incorporates H.R. 1 because it would reverse reforms in Federal housing policies which Congress and the Administration have pursued since 1981.

The five year cost of H.R. 1 is estimated to be $96 billion, $34 billion more than the President's Budget level of $62 billion. In FY 1987, additional outlays would be approximately $3.6 billion, over to the President's Budget level of $13.4 billion.

In addition to its excessive costs, H.R. 1 contains many objectionable features, including:

— relaxing the targeting of assistance to the neediest families;

— creating a new Federal subsidy for middle-income homeownership (Nehemiah grants), which would be feasible only in a few large cities, containing hidden costs, and targeting funds to middle-income homebuyers at a time when interest rates are falling and most families are able to qualify for conventional or FHA mortgage financing;

— the Multifamily Management and Preservaton provision in section 221 which is the most costly single provision in the bill, and would require about $6 billion in Section 8 subsidies in the year of enactment and about $600 million per year thereafter;

— extending programs which are not cost-effective and should be terminated, such as UDAG, Section 312 Rehabilitation Loans, Section 235 Homeownership Assistance Program, and Rental Housing Development Grants (HoDAG);

— prohibiting the establishment of, or increases in, housing credit user fees for the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association, and Federal Housing Administration;

— severely restricting HUD's ability to administer the Government National Mortgate Association's mortgage-backed securities program;

— providing for public housing ceiling rents; and reducing the contribution toward rent payments required by elderly tenants from 30 to 25 percent of their income, increasing outlays by approximately $384 million in 1987; and

— increasing the fees paid to public housing authorities for administering the Section 8 existing and housing voucher programs, at the expense of assistance to poor tenants.

In addition to these provisions from H.R. 1, the Administration objects to the provisions establishing a statutory timetable for holds on deposited funds.