You are on page 1of 2

Page 1

177 of 203 DOCUMENTS

Associated Press Online

September 10, 2003 Wednesday

Snow Seeks Regulation on Mortgage Giants



LENGTH: 727 words


Treasury Secretary John Snow asked Congress Wednesday for a stronger government hand over the mortgage
companies Freddie Mac and Fannie Mae, saying "we cannot be complacent" about the economically vital housing

Snow opened a partisan debate over homeownership for low-income people by asking lawmakers to shift financial
regulation of the two government-sponsored companies to his Treasury Department from the Department of Housing
and Urban Development. The administration proposal he put forward would widen the government's authority over the
two biggest players in the multitrillion-dollar home mortgage market, whose stock is widely traded.

The Treasury chief also proposed abolishing presidential appointments to the boards of the two politically influential
companies, a system that enables presidents' allies and friends to reap tens or hundreds of thousands of dollars in fees,
company stock and stock options.

"Housing finance is so important to our national economy that we need a strong, world-class regulatory agency to
oversee" the financial operations of Fannie Mae and Freddie Mac, Snow told the House Financial Services Committee.

Snow said government needs to pay close attention "to the resilience of our system of housing finance."

Congress, which created the two companies and has not wanted to upset the housing market, now appears largely
receptive to such a plan in the aftermath of Freddie Mac's accounting troubles - which brought the ouster of two chief
executives since early June and investigations by the Justice Department and the Securities and Exchange Commission.

In a turnaround, Committee Chairman Rep. Michael Oxley, R-Ohio, the most frequent featured guest at 19 recent
fund-raisers for GOP lawmakers staged by Freddie Mac's chief lobbyist, declared Wednesday his commitment to draft
new legislation based on the administration plan.

His counterpart Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee - who also had been
lukewarm toward previous proposals for tighter regulation of the two companies - joined with Oxley in promising to
work on legislation.

Democrats complained about the plan to leave HUD with authority over the two companies' mission to expand
homeownership, especially among lower-income people, while moving financial regulation to Treasury.

"I do not believe we are facing any kind of a crisis," declared Rep. Barney Frank of Massachusetts, the committee's
Page 2
Snow Seeks Regulation on Mortgage Giants Associated Press Online September 10, 2003 Wednesday

senior Democrat. He warned it could be difficult for HUD to make the two companies meet the goals if regulatory
power only resided in Treasury.

Rep. Mel Watt, D-N.C., insisted strong government control is needed in this area because, he said, most private
businesses don't care much whether poor people have housing.

HUD Secretary Mel Martinez, appearing with Snow, said that "HUD is the appropriate agency to develop and enforce
the housing goals."

Critics of stricter government regulation maintain it could roil the housing market, one of the few bright spots in a
gloomy economy. The HUD agency that currently oversees the two companies has been criticized by some lawmakers
as weak and ineffective and too slow to investigate Freddie Mac.

Freddie Mac, in a statement, said the administration appears to have a responsible plan. Fannie Mae Chairman and
CEO Franklin Raines said his company also welcomed the proposal.

McLean, Va.-based Freddie Mac, a $40 billion-a-year company, disclosed that accounting errors and manipulations of
internal accounts resulted in its underreporting earnings by $1.5 billion to $4.5 billion in the 2000-2002 period.

Separately, after the issue arose at Wednesday's hearing, the Treasury Department said it had asked its inspector general
to investigate a news report that an IBM lobbyist distributed a document that may have been doctored to show that
Treasury opposed controversial pension rules. Snow had promised an inquiry in response to questioning by panel
member Rep. Bernie Sanders, I-Vt., who won an amendment Tuesday to a House spending bill that would prevent
Treasury from overturning a federal court ruling against IBM's cash-balance pension plan.

Critics like Sanders maintain that such company plans discriminate against older workers.


On the Net:

Fannie Mae:

Freddie Mac:

LOAD-DATE: September 11, 2003


Copyright 2003 Associated Press

All Rights Reserved