OFHEO: Congress Must Act to Pass GSE Reform

Article excerpt

Congress must act to strengthen the structural integrity of Fannie Mae and Freddie Mac, as well as that of their regulator, in order to curb systemic risk and reduce system-wide uncertainty, declared James Lockhart, director of the Office of Federal Housing Enterprise Oversight (OFHEO).

Despite the support of both GSEs, the Bush administration and a number of key lawmakers, the resulting "legislative uncertainty" from congressional inaction on GSE legislation has cast a cloud over Fannie and Freddie, said Lockhart during a speech at the National Economists Club in Washington, D.C., in late September.

"The status quo means the enterprises and their shareholders will continue to confront uncertainty," said Lockhart. "If Congress fails to act on legislation this year, OFHEO will not be on the same playing field as other financial regulators. Our field will continue to be tilted toward the enterprises."

As we've reported, the House passed a GSE reform bill, the Federal Housing Finance Reform Act of 2005 (H.R. 1461), in November 2005. However, the Senate's reform bill--the Federal Housing Enterprise Regulatory Reform Act of 2005 (S. 190)--has been bogged down since it moved out of committee along a strict party-line vote over the issue of GSE mortgage portfolios (see Mortgage Banking, September 2005, p. …