Bill to Conglomerate Regulatory Agencies Facing a Tough Fight

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A bill that would combine the regulators of Fannie Mae, Freddie Mac, and the Federal Home Loan Banks faces an uphill battle, despite endorsement from House Banking Committee Chairman Jim Leach and others.

Sponsored by Rep. Richard Baker, R-La., the legislation would combine the oversight duties of the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board and some of the jurisdiction of the Department of Housing and Urban Development into an independent agency called the Housing Finance Oversight Board.

Currently, the Finance Board regulates the 12 Federal Home Loan banks; monitoring of Fannie and Freddie is split between the housing oversight office and HUD.

Rep. Baker said he believes the bill would strengthen regulation of all the housing government-sponsored enterprises. In particular, he said, it would increase oversight of Fannie and Freddie -- two of the largest financial institutions in the nation -- in the hopes of preventing another meltdown like the savings and loan crisis of the 1980s.

"Taxpayers can be put at risk during systemic downturns in economic activity," Rep. Baker said at a news conference Thursday, sponsored by a new coalition of activist groups called the Homeowners' Education Coalition. "We should have the regulatory capacity to protect against such an event."

Rep. Baker doesn't question the current health of the government-sponsored enterprises, but he is concerned about their growing size and their close ties to the government. Freddie Mac currently has a market capitalization of $26.4 billion, while Fannie Mae has a valuation of $50.9 billion. If either were to fail, taxpayers could face a potentially enormous liability, largely because of the government's implicit backing of their activities. …