Snowjob on FNM
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"The recent troubles at Fannie Mae and Freddie Mac "reinforce concerns over the systemic risks posed" by the companies, Snow said. He said the problems further highlight the need for a new regulatory regime for them "to ensure that our housing finance system remains a strong and vibrant source of funding for expanding homeownership opportunities in America."
The Bush administration is troubled that neither company filed financial statements "that can be relied upon," Snow said.
A strong new regulator of Fannie Mae and Freddie Mac, with the power to put them into receivership, should be established, Snow urged.
A move afoot on Capitol Hill could bring stricter oversight of Fannie Mae and Freddie Mac and possible limits on their size after accounting scandals at the government-sponsored mortgage companies.
Snow has previously asked Congress for a stronger government hand over the two biggest players in the multitrillion-dollar home mortgage market, whose stock is widely traded.
Greenspan's warning to senators on Wednesday lent support to the effort by Republicans in Congress to tighten controls on Fannie Mae and Freddie Mac. The Federal Reserve chief told the banking panel that it might not be enough just to create a strong regulator for the companies, which hold or guarantee more than 45 percent of all mortgage loans in the country.
Legislation recently proposed would set up a regulatory agency with the power to compel the companies to sell off any assets deemed not to be in line with their mission of making homeownership more widely available.
The measures would not have Congress set binding limits on the size of the companies' portfolios, which together have grown to $1.5 trillion. They also have issued $1.8 trillion in debt.
"Without restrictions on the size of (their) 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 homeownership," Greenspan testified.
Portfolio restrictions would not affect mortgage rates for homeowners because so many big banks and other lenders compete with Fannie Mae and Freddie Mac, Greenspan said, citing a Fed study. While the companies' stock prices had fallen as a result of the accounting turmoil, he noted that "mortgage markets have functioned well."
One committee member, Sen. Charles Schumer, disputed that notion. "It almost defies belief that mortgage rates won't go up," Schumer, D-N.Y., told Greenspan. "On this issue, we don't see eye to eye."" -Paul |
