Bush Fought to Regulate Freddie Mac , Mae 5 Years Ago Until Democrats Stopped Him
Spetember 11, 2003
The Bush administration today recommended the most significant
regulatory overhaul in the housing finance industry since the savings
and loan crisis a decade ago.
Under the plan, disclosed at a Congressional hearing today, a new
agency would be created within the Treasury Department to assume More.. supervision
of Fannie Mae and Freddie Mac, the government-sponsored companies that
are the two largest players in the mortgage lending industry.
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.
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.
''There is a general recognition that the supervisory system for
housing-related government-sponsored enterprises neither has the tools,
nor the stature, to deal effectively with the current size, complexity
and importance of these enterprises,'' Treasury Secretary John W. Snow
told the House Financial Services Committee in an appearance with
Housing Secretary Mel Martinez, who also backed the plan.
Mr. Snow said that Congress should eliminate the power of the president
to appoint directors to the companies, a sign that the administration
is less concerned about the perks of patronage than it is about the
potential political problems associated with any new difficulties
arising at the companies.
The administration's proposal, which was endorsed in large part today
by Fannie Mae and Freddie Mac, would not repeal the significant
government subsidies granted to the two companies. And it does not
alter the implicit guarantee that Washington will bail the companies
out if they run into financial difficulty; that perception enables them
to issue debt at significantly lower rates than their competitors. Nor
would it remove the companies' exemptions from taxes and antifraud
provisions of federal securities laws.
The proposal is the opening act in one of the biggest and most significant lobbying battles of the Congressional session.