Outspoken government-sponsored enterprise critic Rep. Richard Baker (R-La.) will come out at the end of this month with what may be his best shot yet at passing a bill that will tighten the screws on mortgage giants Fannie Mae and Freddie Mac. The new bill will likely seek to abolish the Office of Federal Housing Enterprise Oversight and create a new regulator within the Treasury, which would be similar to a previous bill but is seen as having a better chance of coming to fruition now.
Rep.Chris Shays (R-Conn.), the second ranking member of the capital markets, insurance and GSE subcommittee Baker chairs, told BW the new bill will propose a regulator with a bigger bite. "OFHEO has been subservient to the GSEs; we're working with the Treasury department on a new regulator," Shays said. The congressman is also investigating legislation that would require the GSEs to register their securities with the Securities and Exchange Commission, revisiting his bill submitted in 2003.
The legislation has a much better chance of being passed this year and tops Congress' list of priorities, as indicated through last week's hearing on the accounting issues at Fannie Mae, which was the first of the 109th Congress' House Committee on Financial Services.
The tide is seen as more in Baker's favor because of the SEC's finding in December that Fannie Mae had substantial accounting errors and the eventual ousting of CEO Franklin Raines. And at last week's hearing, Fannie Mae supporters seemed to have accepted the company was guilty of accounting misconduct, according to Michael Duresto, Baker's spokesman. "When we had hearings in October, one of the lines used to attack OFHEO and defend Fannie Mae was, 'Let's wait and see what the SEC says about it.' This time, the line seemed to be to ask how many other companies were guilty of the same accounting aberrations," he added. Baker could not comment by press time.
Brian Faith, Fannie Mae spokesman, declined comment. Sharon McHale, Freddie Mac spokeswoman, declined comment.
