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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (30153)	4/6/2005 12:37:16 PM
From: ild	Respond to of 110194

WASHINGTON (Dow Jones)--Federal Reserve Chairman Alan Greenspan said Wednesday Congress should not set a specific limit on Fannie Mae and Freddie Mac's portfolios but instead allow a regulator to set limits within a framework. "I think the ideal thing to do is to have Congress give general guidance," he told the Senate Banking Committee. "You create a framework which enables them to make a judgment...Exactly how the legislation is written has got to be up to the Congress." The Senate panel called Greenspan to testify Wednesday at a hearing about reforming the two housing giants. Fannie Mae (FNM) and its smaller counterpart Freddie Mac (FRE) are government-sponsored enterprises charged with assisting housing finance. Both companies have been rocked by recent accounting scandals, prompting additional calls by lawmakers and others for legislation that would strengthen regulation of the companies. Greenspan said the companies combined portfolios, which total roughly $1.5 trillion, do little to assist homebuyers. He said the mortgage market and homebuyers are only helped when the companies play their traditional roles of buying home mortgage loans, packing them into securities and selling them on the secondary mortgage market. Since the early 1990s both Fannie and Freddie have sharply ramped up the amount of loans they purchase to hold on their own books. Greenspan said he can't see any reason why those holdings need to total more than $100 billion. He explained some holdings are necessary, for example, to back some affordable housing loans that aren't easily sold on the secondary mortgage market. Both House and Senate lawmakers have introduced new GSE reform legislation this year after similar proposals failed to become law last year. Senate Banking Chairman Richard Shelby, R-Ala., has said the accounting troubles at Fannie Mae - first revealed last fall - strengthen the chances for legislation becoming law this year. In a note to investors Wednesday, Lehman Brothers analysts also said there's a "relatively high" probability that a bill strengthening regulation of Fannie, Freddie as well as the Federal Home Loan Bank System, another housing GSE, will become law this year.