WASHINGTON (Dow Jones)--House Financial Services Chairman Michael Oxley, R- Ohio, urged lawmakers Wednesday to back legislation overhauling the oversight of Fannie Mae (FNM), Freddie Mac (FRE) and the Federal Home Loan Banks, saying accounting problems at all three "threaten" the U.S. housing markets.
"We've heard from some that Congress should be cautious in its efforts to create a new regulator and that we should be mindful not to harm the housing markets," Oxley said at the top of a committee hearing on the matter.
"In truth, the housing markets are being threatened now by the various accounting and regulator problems at the GSEs and by the lack of a regulatory agency with real power and real authority," he said.
Oxley said a House bill he's co-sponsored with Rep. Richard Baker, R-La., " strikes the right balance of legislation that's not overly burdensome" while ensuring the new regulator over all three government-sponsored enterprises, or GSEs, has adequate authority to adjust minimum capital, approve new programs and appoint a receiver to manage a failed GSE, among other things.
"At this time in 2003, we were all led to believe that the GSEs were running smoothly with only a routine accounting restatement in progress at Freddie Mac," Oxley said. "What we have learned since then is that the enterprises were involved in revenue smoothing, the misapplication of accounting standards and irresponsible corporate governance."
Oxley urged lawmakers to support a new oversight structure for the GSEs to prevent the type of accounting and financial problems that have emerged in recent months. He noted that lawmakers need to give the new regulator the power to adjust the GSEs' portfolio size.
"This is an important power in that it will ensure the GSEs do not hold portfolios that are unsafe or unsound or in violation of their mission," he said.
Treasury Secretary John Snow and Housing and Urban Development Secretary Alphonso Jackson also called on Congress in written testimony to the committee to strengthen the GSEs' oversight. They warned of a near-certain financial crisis if lawmakers don't curb Fannie and Freddie's vast mortgage portfolios. |
