White House Opposes Bill on Fannie Mae
By MARCY GORDON, AP Business
WASHINGTON - The Bush
administration came out Friday in opposition to Republican-written
legislation that would tighten regulation of Fannie Mae and Freddie
Mac because it would let Congress overrule a decision by regulators
to take over either of the mortgage giants in a financial failure.
Treasury Secretary John Snow and Alphonso Jackson, new head of
the Department of Housing and Urban Development (news - web sites),
said the bill approved Thursday by the Senate Banking Committee
"would have been a substantial step forward" except
for the provision giving Congress that override authority.
Snow and Jackson said in a statement the provision "would
significantly weaken one of the core powers needed for a strong
regulator (and) ... could reinforce a false impression that the
American taxpayer provides an implicit guarantee" to the
The bill would tighten the reins on the two companies and create
a new federal regulatory body to oversee them. It cleared the
Banking Committee on a 12-9 vote, mostly along party lines as
the panel's Republican majority prevailed. The slim margin means
Democrats probably could use the Senate's procedural rules to
block eventual passage.
The House has not acted on similar legislation.
The Senate bill would allow the new regulatory agency to put Fannie
Mae or Freddie Mac into receivership should they become insolvent
and to sell off their assets, favored by the White House. An amendment
written by Sen. Robert Bennett, R-Utah, curbed the regulators'
power, however, by giving Congress the right to review such a
move and up to 45 days to override it.
The debate over receivership was kindled in February when Federal
Reserve (news - web sites) Chairman Alan Greenspan (news - web
sites) warned that Fannie Mae and smaller rival Freddie Mac could
pose a threat to the U.S. financial system should their ability
to assume new debt continued unrestrained.
Political pressure for restraints on the companies' operations
already had been building after a $5 billion accounting scandal
last year at Freddie Mac.
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