Fed Chair Calls for Big Changes at Freddie Mac and Fannie Mae

WASHINGTON, DC-At a hearing this week before the US Senate Banking Committee, Federal Reserve chairman Alan Greenspan recommended that Congress put a cap on the amount of debt mortgage financiers Fannie Mae and Freddie Mac are allowed to issue for the purchase of assets. The move is a necessary one, Greenspan explained, because excessive growth of the government-sponsored enterprises’ mortgage portfolio could become dangerous to the nation’s financial system down the road. He also proposed that a new regulator be created to oversee the companies, taking over the reigns from current regulator, the Office of Federal Housing Enterprise Oversight.

Fannie Mae officials expressed their strong disagreement with the chairman’s suggestions, saying they were based on faulty research. “We find it surprising that his testimony relies so heavily on a working paper by a member of the Federal Reserve staff, which is still being reviewed by many experts as the chairman requested, ” says Jayne Shontell, Fannie Mae senior vice president for investor relations. “ The working paper’s author himself has written that the data he used were inadequate for the analysis he was attempting to do.”