Industry News

Fed chief offers views on GSE reform bill

Bernanke: Focus on affordable housing, let GSEs assume other risks

Congress should overhaul the operations of mortgage repurchasers Fannie Mae and Freddie Mac by focusing their portfolios on affordable housing and making it clear that the government will not bail them out if the companies overextend themselves outside of that arena. Those were the first public remarks by Federal Reserve Chairman Ben Bernanke on GSE reform as Congress continues to debate legislation in the wake of the accounting and management scandals at Fannie and Freddie. Speaking at the Independent Community Bankers of America's annual convention in Honolulu, Hawaii, Bernanke echoed warnings by his predecessor that Fannie and Freddie could pose a systemic risk to the financial markets if they are allowed to grow unchecked. Although the government-sponsored entities, or GSEs, were converted to for-profit, publicly traded companies in the late 1960s, they are still able to borrow money at lower interest rates than competitors because of a belief that the government will bail the...