Grassroots WASHINGTON WATCH The foundations of housing reform ICBA's new white paper makes the community bank case for reforming Fannie and Freddie. By Ron Haynie H ousing-finance reform has been the enigma of Washington's response to the financial crisis. Following their September 2008 conservatorship by the Federal Housing Finance Agency and Treasury Department, the question of what to do with government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac has vexed policymakers, who have repeatedly delayed fundamental reforms or resolution. Just about the only thing that is agreed upon is that reform is needed for a system now dominated by the federal government and vulnerable to future market failures. Fannie and Freddie have returned to profitability, worked through most of their defaulted loans, and continued to provide housing-market liquidity under conservatorship. But they are bleeding 30 ICBA IndependentBanker June 2017 out earnings and capital in their quarterly dividends to the U.S. Treasury, having paid out nearly $80 billion more than they received in relief during the crisis. Without any change to their agreement with Treasury, the capital buffers of both GSEs will drop to zero by Jan. 1, 2018. To move the discussion forward and support continued access to the secondary mortgage market for community banks, ICBA recently released