By Keith Bradsher
N.Y. Times News Service
WASHINGTON _ The Senate is finally nearing a vote, expected as
early as today, on a measure that for the first time would
subject to independent regulation two governmentonsored
institutions that have guaranteed nearly $1 trillion worth of
The road to the vote has been tortuous, and not just because
of the political influence of the two institutions: the Federal
National Mortgage Association, also known as Fannie Mae, and the
Federal Home Loan Mortgage Corp., better known as Freddie Mac. As
often happens in the Senate, the bill has become a vehicle for
largely unrelated issues.
A deal early last week has helped the bill go forward, but
with two new provisions that would shield municipalities and
financial institutions from environmental cleanup lawsuits.
Another deal late last week makes it likely that Senate
Republicans will withdraw an amendment that would require a
As for the bill's main point, it satisfies Fannie Mae and
Freddie Mac but does not go nearly far enough to appease their
critics, who contend that the two investorned companies enjoy an
implicit federal guarantee on loans that could some day cost
taxpayers billions of dollars if defaults soared on mortgages.
The bill would give the Department of Housing and Urban
Development authority to regulate Fannie Mae and Freddie Mac. The
measure would also set minimum capital standards in an effort to
prevent a financial setback at either institution from costing
taxpayers billions of dollars.
Drafted in response to fears of a future burden on taxpayers,
the bill has been so watered down that Fannie Mae and Freddie Mac
are in the slightly odd position of lobbying for a bill to impose
regulations on them.
James A. Johnson, the chairman and chief executive of Fannie
Mae, said he supported the legislation because it would ensure
that the two enterprises retained adequate capital to cover
losses and would concentrate regulation at an agency, Department
of Housing and Urban Development, that already deals with Fannie
Mae and Freddie Mac.
Johnson said that because Fannie Mae's losses as a percentage
of its assets are a tiny fraction of the losses at commercial
banks, the bill appropriately set capital standards below those
Critics contend that HUD is too close to either institution to
be truly independent, and that Fannie Mae and Freddie Mac need to
retain more capital to cope with unforeseen threats, like a
change in the taxductibility of mortgage interest. …