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Disclosure Drumbeat Pounds GSEs

By Garver, Rob | American Banker, August 8, 2003 | Go to article overview

Disclosure Drumbeat Pounds GSEs


Garver, Rob, American Banker


File this one under unintended irony.

In a speech Wednesday, Freddie Mac chief executive Greg Parseghian, under fire for his involvement in transactions that contributed to an ongoing accounting scandal, promised to usher in a policy of candid disclosure.

"I am fiercely determined to lead our great company to be the best at everything we do," he said. "And we will do it in a manner marked by openness, transparency, and candor."

Mr. Parseghian then took questions from a select group of large investors and Wall Street analysts who were invited to meet with him in a private lunch at New York's tony Le Cirque restaurant. Members of the press and the public were not allowed to attend.

His decision to answer analysts' questions in private, when he has declined to make himself available to the press, drew a dart from The Washington Post and others the following morning.

Freddie officials said that it had lawyers present at the meeting who were there to make sure that no material information was discussed without being immediately released to the investing public. No such releases were made, and Freddie insists that the assembly of equity analysts and institutional investors who attended the lunch did not learn anything material about the company.

Meanwhile, Fannie Mae officials were greeted Thursday morning with a story in The New York Times suggesting that the company has not revealed the true level of risk in its mortgage portfolio.

If they suffer a few more days like that, Fannie and Freddie are going to find it very difficult to avoid the increasingly loud calls from Congress for better disclosure of their finances and tougher regulation of their business practices. The stories gave momentum to legislators who have been trying to force the two government-sponsored enterprises to give up their exemptions from compliance with certain Securities and Exchange Commission reporting requirements.

"It's clear we can no longer afford to turn a blind eye to the second- and fourth-largest financial firms in the country," said Rep. Christopher Shays, R-Conn., who has sponsored a bill that would strip away those exemptions. "Congress, investors, and the public have a right to know the financial condition of these companies and ought to have a strong, independent regulator that has the resources to oversee their operations."

The reports also appeared to strengthen movements sponsored by several lawmakers to overhaul GSE regulation -- several of which advocate abolishing the GSEs' primary regulator and putting them under the Treasury Department's supervision.

Rep. Richard H. Baker, R-La., one of the most outspoken critics of GSE regulation, said that he is confident his colleagues will come together on legislation quickly.

"However it comes about ... there is no doubt in my mind that before the Congress adjourns this year there will be legislation out of both houses sitting in a conference somewhere," he said in an interview.

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