By Eugene T. Lowe
September 29, 2003

The House Financial Services Committee, Chaired by Representative Michael Oxley (OH), has been holding hearings directed toward creating a new agency to regulate the Government Sponsored Enterprises (GSEs), Fannie Mae and Freddie Mac. The Department of Housing and Urban Development currently regulates the GSEs through the Office of Federal Housing Enterprise Oversight (OFHEO). The new agency would operate out of the Department of Treasury and regulate the GSEs' financial activities. HUD, however, would create a new office, which would monitor and enforce the affordable housing goals of Fannie and Freddie. OFHEO would be abolished.

In a letter to both houses of Congress, Conference President Hempstead (NY) James A. Garner said, "We are in support of changes to the regulatory structure of Freddie Mac and Fannie Mae... but urge that special care be taken that no harm is done to the tremendous contribution these government'sponsored enterprises make to our cities and our country." In reference to the specifics of the proposal being discussed, Garner added: "We agree with Treasury Secretary John W. Snow that the capital standard of the GSEs 'should not become the subject of frequent change.- However, we are opposed to federal department approval of products developed by the GSEs. We believe that this will unnecessarily delay worthy innovations as well as stifle the creativity that we have seen in Fannie Mae and Freddie Mac over the years." In addition to Garner's letter as President of the Conference of Mayors, scores of mayors across the nation have sent letters to congress expressing that, as regulatory changes are made no harm be done to Fannie Mae and Freddie Mac in pursuit of their mission or business.

of mayors across the nation have sent letters to congress expressing that, as regulatory changes are made no harm be done to Fannie Mae and Freddie Mac in pursuit of their mission or business.

In testimony before the Financial Services Committee on September 25, Franklin D. Raines, Chairman and CEO of Fannie Mae, supported the administration's proposal to move the financial regulator to Treasury, but said with respect to federal department approval: "We believe any legislation must again reiterate the congressional view that Fannie Mae should support innovation in the market as it carries out its mission. Congress needs to make clear again that the companies are encouraged to innovate and be responsive to market needs. In addition, we believe that any change in this area must take into account the very strong concerns that have been raised from many within the housing industry, to ensure that innovation can remain strong."