New Agency Proposed to Oversee Freddie Mac and Fannie Mae
[FONT=Times New Roman,Times,Serif]By STEPHEN LABATON [/FONT]
[FONT=Times New Roman,Times,Serif]The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. [/FONT]
[FONT=Times New Roman,Times,Serif]Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. [/FONT]
[FONT=Times New Roman,Times,Serif]The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. [/FONT]
[FONT=Times New Roman,Times,Serif]The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac — which together have issued more than $1.5 trillion in outstanding debt — is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates.[/FONT]
[FONT=Times New Roman,Times,Serif]… Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. [/FONT]
[FONT=Times New Roman,Times,Serif]”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.” [/FONT]
[FONT=Times New Roman,Times,Serif]Representative Melvin L. Watt, Democrat of North Carolina, agreed. [/FONT]
[FONT=Times New Roman,Times,Serif]”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.[/FONT]
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