House, Senate Taking Different Approaches to Fannie, Freddie Reform
|April 16, 2007|
Alan Zibel, AP Business Writer
WASHINGTON -(Associated Press)- Amid a worsening housing slump, Senate and House lawmakers are pushing different approaches to strengthen oversight of the two government-backed mortgage giants, Fannie Mae and Freddie Mac.
The housing downturn and accounting scandals at the publicly traded companies in recent years have renewed demands that lawmakers and regulators rein in Fannie Mae and Freddie Mac, which hold a combined $1.5 trillion worth of mortgages.
A key Democratic-led House committee two weeks ago approved a bill requiring the two biggest buyers of home mortgages to finance a five-year affordable housing fund, estimated to provide $300 million to $500 million annually.
In the first year, the money would go to states hardest hit by the Gulf Coast hurricanes in 2005 and would be divided among all 50 states in subsequent years. Lawmakers want to direct money initially to Louisiana and Mississippi because the need for affordable housing there is still urgent, said Steve Adamske, spokesman for Rep. Barney Frank, D-Mass., the House Financial Services Committee's chairman.
Senate Republicans late this week introduced legislation that does not require creation of a fund or initially focus on Hurricane Katrina victims, but requires the companies' portfolios to focus on affordable housing "to the maximum extent possible."
The bill by Republican Sens. Chuck Hagel of Nebraska, John Sununu of New Hampshire, Elizabeth Dole of North Carolina and Mel Martinez of Florida is similar to bills the Senate Banking Committee has passed twice in the past, when the GOP was in charge.
For now, lawmakers are downplaying the differences. Marvin Fast, a spokesman for Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, said in an e-mail Friday that there is broad agreement on the need for a "stronger, more independent regulator" to oversee Fannie and Freddie.
Dodd believes reform is a priority, but has not given a timetable for introducing a bill, Fast said.
A spokeswoman for Freddie Mac declined to comment on specific legislation. A spokesman for Fannie Mae declined to comment.
Federal Reserve Chairman Ben Bernanke last month suggested limiting Fannie Mae and Freddie Mac's holdings to guard against any danger their debt poses to the health of the overall economy.
In a statement, Dole, a sponsor of the GOP bill in the Senate, said, "Fannie Mae and Freddie Mac must be run properly and with adequate transparency and oversight ... We will not tolerate an intentionally weak regulator, especially when the stakes are so high for American taxpayers, the housing sector and the economy as a whole."
The Office of Federal Housing Enterprise Oversight Tuesday said in a report that Fannie Mae, the biggest buyers of mortgages, and No. 2 rival Freddie Mac "remain a significant supervisory concern" despite progress in fixing financial control problems that resulted in multibillion-dollar earnings restatements the past few years.
Washington-based Fannie Mae in December restated earnings for 2001 through mid-2004 that erased $6.3 billion in profit. Freddie Mac disclosed in mid-2003 that it had misstated earnings by at least $5 billion for 2000 through 2002. The agency paid a then-record $125 million fine in a civil settlement with regulators.
Various efforts over the past several years to tighten the government's reins on Fannie Mae and Freddie Mac have languished.
Shares of McLean, Va.-based Freddie Mac closed down 1 cent to $60.01 on the New York Stock Exchange and fell another penny in aftermarket trading. Fannie Mae ended the day 3 cents lower to $53.94, also on the NYSE.
© Copyright 2007 The Associated Press.