Legislation that could force Fannie Mae and Freddie Mac to significantly reduce their investment portfolios was released Friday by Senate Banking Committee Chairman Richard C. Shelby, R-Ala., the Washington Post reported.

By proposing to give a new regulator broad discretion over the kinds of assets Fannie Mae and Freddie Mac can hold, Shelby has followed the course preferred by the Bush administration – but set up a possible conflict with the House, where Financial Services Committee Chairman Michael G. Oxley, R-Ohio, supports a less strict set of rules, the Post reported.

Oxley has also been working toward a set of rules for the mortgage giants, whose combined investment portfolios total $1.5 trillion.

Fannie Mae has been shrinking its portfolio to bolster its capital cushion and meet regulatory requirements as it struggles to resolve accounting problems uncovered by the Office of Federal Housing Enterprise Oversight last year that led to the possible restatement of as much as $12 billion in previously reported earnings.

Both the White House and Federal Reserve Chairman Alan Greenspan say Fannie Mae and Freddie Mac pose a risk to the economy because they have grown too large. Shelby plans to bring his bill before the Banking Committee Thursday, the Post reported

“I am hopeful that the Committee will be able to pass this strong, meaningful legislation. The new regulator simply must be able to ensure the safe and sound operations of [the two companies] while they pursue their mission in a manner that does not pose systemic risk” to the economy, Shelby said Friday, the Post reported.

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.

Fannie Mae’s financial accounting troubles have drawn shareholder lawsuits and investigations by the Justice Department and the Securities and Exchange Commission.

***

Send tips or a Letter to the Editor to janis@inman.com or call (510) 658-9252, ext. 140.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Real estate news and analysis that gives you the inside track. Subscribe to Inman Select for 50% off.SUBSCRIBE NOW×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription