The White House on Monday called for a new, stronger regulator for government-sponsored housing enterprises, saying problems at one of the major mortgage finance companies could spread through the financial system, news sources said.

An analysis of the U.S. economy accompanying the Bush administration’s budget proposal questioned the value of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System given the risk their operations pose, sources said.

The Bush administration said a new regulator should be created consolidating Fannie Mae’s and Freddie Mac’s regulator with that of the Federal Home Loan Bank System.

The call for a tougher overseer comes in the wake of accounting scandals at both Freddie Mac and Fannie Mae. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.

In late January, a bill to strengthen regulation of government sponsored enterprises such as Fannie Mae and Freddie Mac was introduced by three Republicans in the U.S. Senate.

The legislation would create an independent regulator with the power to shut down the home loan financing giants and other GSEs to protect against a taxpayer bailout if they are failing. The regulator would also have the power to approve new programs and products proposed by Fannie Mae and Freddie Mac.

The current agency that oversees Fannie Mae and Freddie Mac is the Office of Federal Housing Enterprise Oversight, an independent entity under the umbrella of the Department of Housing and Urban Development.

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