Alan Greenspan, chairman of the Federal Reserve, on Thursday told the House Financial Services Committee he sees “no reasonable basis” for Fannie Mae and Freddie Mac to hold enormous mortgage portfolios, according to Forbes.

Saying that the problems are “almost inevitable,” Greenspan testified that Congress should consider forcing the two mortgage giants to reduce their portfolio holdings. The combined holdings, more than $1.5 trillion, “potentially create ever-growing potential for systemic risk down the road,” Greenspan said, according to media accounts.

Greenspan’s testimony to the committee was in accord with statements made in preceding weeks by U.S. lawmakers to the effect that Fannie Mae and fellow GSE Freddie Mac need tougher regulation.

The calls for stronger regulation come in the wake of accounting scandals at both Fannie Mae and Freddie Mac. 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.

“It is time to act to fend off the problems that are almost inevitable,” Greenspan told Rep. Richard Baker (R-La.), in answer to questions, Forbes reported.

House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) has pledged to continue his work toward a legislative reform package this Congress. Oxley has said that it is necessary to build a regulator for the GSE with the power, independence and funding to confront and handle such matters.

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