tinyurl.com/4qd8j3 -> query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&scp=1&sq=%22barney+frank%22&st=nyt
Save By STEPHEN LABATON Published: September 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 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. 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. 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. After the hearing, Representative Michael G Oxley, chairman of the Financial Services Committee, and Senator Richard Shelby, chairman of the Senate Banking Committee, announced their intention to draft legislation based on the administration's proposal. Industry executives said Congress could complete action on legislation before leaving for recess in the fall. The Office of Federal Housing Enterprise Oversight, which is part of the Department of Housing and Urban Development, was created by Congress in 1992 after the bailout of the savings and loan industry and concerns about regulation of Fannie Mae and Freddie Mac, which buy mortgages from lenders and repackage them as securities or hold them in their own portfolios. At the time, the companies and their allies beat back efforts for tougher oversight by the Treasury Department, the Federal Deposit Insurance Corporation or the Federal Reserve. Supporters of the companies said efforts to regulate the lenders tightly under those agencies might diminish their ability to finance loans for lower-income families. This year, however, the chances of passing legislation to tighten the oversight are better than in the past.
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