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Senator Richard Shelby Tells CNBC's Maria Bartiromo that Senate has Reached an Agreement on Housing Bill (Transcript Included)

Senator Richard Shelby
Senator Richard Shelby

When: Monday, May 19th at 4:30 PM ET
Where: CNBC'S "Closing Bell with Maria Bartiromo"

The following is the unofficial transcript of a CNBC interview with Senator Richard Shelby on CNBC's "Closing Bell with Maria Bartiromo" today at 4:30 PM ET. All references must be sourced to CNBC.

During the interview with CNBC's Maria Bartiromo, Shelby says he and Senator Dodd have reached an agreement on the housing bill which will be funded by Fannie Mae and Freddie Mac.

BARTIROMO: WELCOME BACK. WE HAVE BREAKING NEWS COMING IN TO US RIGHT NOW AT CNBC. WITHIN THE LAST TEN MINUTES THE SENATE BANKING COMMITTEE ANNOUNCED AN AGREEMENT ON A NEW HOUSING BILL TO HELP TROUBLED HOMEOWNERS. WE HAVE THE DETAILS ON THE AGREEMENT FROM THE RANKING REPUBLICAN ON THE SENATE BANKING COMMITTEE, ALABAMA SENATOR RICHARD SHELBY JOINING US RIGHT HERE IN THE STUDIO AT THE NYSE. NICE TO HAVE YOU, SENATOR. WELCOME. CONGRATULATIONS ON THIS NEW HOUSING LEGISLATION. TAKE US THROUGH THIS AGREEMENT. WHAT DOES THIS MEAN?

SHELBY: WELL, I'LL TELL YOU FAST THAT THIS IS A VICTORY FOR THE TAXPAYERS AS FAR AS THE HOUSING COMPONENT IS CONCERNED. WE'RE NOT FUNDING THIS HOUSING HOPE PROBLEM PROPOSED BY CONGRESSMAN FRANK AND SENATOR DODD WITH TAXPAYERS' MONEY. WE'RE GOING TO DO IT THROUGH A GSE, AFFORDABLE HOUSING FUND. NUMBER TWO, THIS IS REFERMATION OF THE GOVERNMENT-SPONSORED ENTERPRISE FREDDIE AND FANNIE. I'VE BEEN WORKING ON IT IVE YEARS. SENATOR DODD AND I HAVE BEEN WORKING ON IT CLOSELY AND OUR STAFF THE LAST WEEK OR TEN DAYS, WE'RE GLAD WE GOT TO THE POINT OF AGREEMENT TODAY.

BARTIROMO: SO TELL ME WHERE THE MONEY COMES FROM, THE COST OF THIS, MORE DETAILS IN TERMS OF HOW THIS WILL PLAY OUT.

SHELBY: WE'LL GIVE YOU THE DETAILS TOMORROW BUT BASICALLY IT BECOMES PART OF THE FUND, DEMOCRATIC PROPOSAL TO CREATE AFFORDABLE HOUSING FUND OUT OF SOME OF THE GSE'S EARNINGS AND THE AFFORDABLE HOUSING FUND WILL BE CREATED BECAUSE THIS IS AN EMERGENCY, A FOUR-YEAR DEAL, BECAUSE THE HOUSING CRISIS REVENUES, THE TAXPAYERS' MONEY, WE'RE GOING TO USE THIS MONEY. I THINK IT'S A WIN-WIN, A DOUBLE WIN FOR ALL OF US.

BARTIROMO: SO MANY PEOPLE SAY, LOOK, WE NEED SOME KIND OF A FLOOR BEING PUT UNDER THIS MARKET IN ORDER TO REALLY GET THROUGH IT. DO YOU SEE THIS AS THAT FLOOR AND HOW MUCH TIME DO YOU THINK IT'S GOING TO TAKE?

SHELBY: GREAT QUESTION. DO I KNOW THE FLOOR? NO, I DON'T. NOBODY KNOWS THE FLOOR YET BUT THIS IS GOING TO BE A STEP IN THE RIGHT DIRECTION. IT'S GOING TO CREATE A PROGRAM TO WHERE PEOPLE THAT NEED TO GET THEIR HOUSES REFINANCED AND CAN MAKE PAYMENTS, WHO HAVE GOOD CREDIT, CAN DO THAT AND THIS IS WHAT THIS IS ABOUT AS FAR AS THE HOUSING FUND IS CONCERNED AND I THINK IT'S A GREAT COMPROMISE.

BARTIROMO: LET ME ASK YOU YOUR THOUGHTS IN TERMS OF HOW LONG THIS TAKES, THIS CYCLE TAKES TO PLAY OUT THEN. A LOT OF EXPECTATIONS THAT THIS IS GOING -- THIS UPSET IS GOING TO GO INTO 2009. WOULD YOU AGREE WITH THAT? IS THAT A FAIR STATEMENT?

SHELBY: I THINK IT'S A FAIR STATEMENT.WE'RE IN 2008 NOW. IT WILL GO AT LEAST INTO '09 BECAUSE A LOT OF MORTGAGES WILL BE RESET AND WE'RE TRYING TO DO IS CREATE A SYSTEM WHERE THEY CAN REFINANCE THEM, A LOT OF PEOPLE CAN MAKE SOME PAYMENTS AND THIS IS A STEP I HOPE A LOT OF PEOPLE USE IT.

BARTIROMO: SO THAT $300 BILLION, JUST TO MAKE SURE I GET THIS, IT'S NOT JUST ENSURING MORTGAGES. IT'S GOING TO BE USED FOR THE REFINANCING?

SHELBY: THAT'S RIGHT. IT'S PART OF THE DEAL AND THE NEXT STEP I BELIEVE WE NEED TO DO AND SENATOR DODD AND I HAVE TO WORK ON AND PERHAPS WE CAN DO IT ON THE FLOOR IS THE MODERNIZATION OF THE FEDERAL HOUSING ADMINISTRATION WILL GO ALONG WITH THIS.

BARTIROMO: TELL ME ABOUT FANNIE AND FREDDIE IN TERMS OF FUNDING SOME OF THE $300 BILLION NUMBER THERE FOR THE INSURANCE PLAN.

SHELBY: WELL, OUT OF THIS LEGISLATION WAS THE CREATION OF WHAT THE DEMOCRATS CALLED AFFORDABLE HOUSING FUND FOR LOW-INCOME HOUSING AND OTHER THINGS AND WE THOUGHT IF WE'RE GOING TO CREATE THAT FUND, WHICH I HAD MY DIFFERENCES TO BEGIN WITH, I SAID IF WE CREATE THIS FUND, WHY DON'T WE USE IT FOR A REAL CRISIS THAT WE'RE FACING NOW AND THEN IN FOUR YEARS OR EVEN LESS YOU'VE GOT IT FOR WHAT YOU INTENDED TO USE IT FOR TO BEGIN WITH.

BARTIROMO: LET ME SWITCH GEARS, SENATOR, AND ASK YOU WHAT HAS BEEN THIS UNPRECEDENTED TIME IN THE MARKETS. WE CAME SO CLOSE TO SEEING A REAL UPSET IN THE FINANCIAL SYSTEM.CERTAINLY IF YOU LISTEN TO TIM GEITHNER, THAT'S WHAT HE WOULD SAY FROM THE NEW YORK FED. DO YOU THINK SOMETHING LIKE THAT TO HAPPEN AGAIN AND THE DISCOUNT WINDOW OPENING FOR THE INVESTMENT BANK, HOW DOES THAT CHANGE THE REGULATORY OVERSIGHT FOR INVESTMENT BANKS VERSUS COMMERCIAL BANKS?

SHELBY: WELL I THINK ONE, WHAT THE FED DID WITH BEAR STEARNS IS UNPRECEDENTED. THEY TESTIFIED AND COVERED THE HEARING IN WASHINGTON THAT THEY NEEDED TO DO IT AND THEY HAD THE LEGAL AUTHORITY TO DO IT AND THEY'VE DONE IT. NOW THEY'RE GOING TO HAVE TO HAVE OVERSIGHT. THE SEC IS GOING TO HAVE TO HAVE CLOSER OTHERSIGHT AND WE IN THE HOUSE AND SENATE SL TO DO IT BECAUSE WE DO HAVE A FINANCIAL CRISIS AND MAINLY IT'S LACK OF CONFIDENCE AND PERHAPS WHAT WE'RE DOING TOMORROW IS GOING TO BE A STEP IN THE LADDER UPWARD.

BARTIROMO: AND WHAT'S THE TIMING ON THE NEWS ONCE YOU –

SHELBY: WE WILL HAVE A MARKUP TOMORROW AND REPORT IT TO THE FLOOR WITH A BIPARTISAN VOTE AND THEN IT WILL BE UP TO THE MAJORITY LEADER. MAYBE WE CAN DO IT NEXT WEEK.

BARTIROMO: BECAUSE PEOPLE WANT THEM TO SHOULDER MORE OF THIS.

SHELBY: ABSOLUTELY. OTHERWISE THIS COULD BE A RISK TO THE TAXPAYER.

BARTIROMO: DO YOU SEE THE PLAN ON THE TABLE -- BACK TO THIS FINANCIAL STRUCTURE IN TERMS OF THE REGULATORY ENVIRONMENT. DO YOU SEE THE STRUCTURE THAT HANK PAULSON HAS BEEN TALKING ABOUT IN TERMS OF GIVING MORE AUTHORITY TO THE FED AND LESS AUTHORITY TO THE SEC, THE PROPER WAY TO -- BECAUSE SOME PEOPLE WORRY NOW THAT THE REGULATORY ARM IS SWINGING TOO FAR TO ONE DIRECTION.

SHELBY: WELL, I THINK MYSELF THAT WE SHOULD NOT GIVE THE FED ALL THE REGULATORY POWER. THEY HAVE A LOT OF POWER NOW. THEY'RE OUR CENTRAL BANK AND THE BIGGEST BANK REGULATOR AND THEY HAVE OTHER POWERS. THE SEC HAS GOT THEIR ROLE. I THINK THAT THE PROPOSALS BY HANK PAULSON SHOULD BE DEBATED AND WILL BE BUT THAT'S FOR ANOTHER DAY.

BARTIROMO: HOW DO YOU FEEL ABOUT THE CURRENT ENVIRONMENT TODAY? DO YOU THINK THAT WE HAVE BEGUN TO SEE SOME STABILITY IN TERMS OF HOUSING?

SHELBY: I HOPE SO BUT THERE'S PROBABLY GOING TO BE A LOT OF FORECLOSURES. THERE WAS A LOT OF MONEY CHASING SOME QUESTIONABLE LOANS AND EVERYBODY WON'T BE SAVED. WHAT WE'RE DOING WITH OUR LEGISLATION IS WHERE THEY HAVE SOME MERIT TO THE LOAN APPLICATION WE CAN REFINANCE IT AND GET THEM OUT OF THE SHORT TERM STUFF.

BARTIROMO: SENATOR, GOOD TO HAVE YOU ON THE PROGRAM. CONGRATULATIONS ON THE LEGISLATION. NICE TO SEE YOU. SENATE HOUSING BILL HAS ITS CRITICS.




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