The Bush administration on Monday said Congress should create a new regulator for Fannie Mae and Freddie Mac and direct it to cut the $1.4 trillion investment portfolios held by the government-sponsored enterprises, media reports said.
In an analysis accompanying Bush’s budget proposal, the White House reiterated its view that the portfolios of loans and securities held by the mortgage giants pose a risk to the broader financial system, according to reports.
The administration said legislation to overhaul supervision of Fannie Mae, Freddie Mac and the Federal Home Loan Bank System should give a new regulator authority to assess not only safety and soundness concerns but also the “systemic risk” posed by the enterprises and their activities, reports said.
Both Fannie Mae and its fellow government-sponsored enterprise, Freddie Mac, have been rocked by accounting scandals. 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 mortgage portfolio increased by an annualized 21.4 percent in December, its first growth in 14 months, the mortgage giant said last Tuesday.
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