Is GSE Report A Setback for Reformers?

By Blackwell, Rob; Rucker, Patrick | American Banker, February 24, 2006 | Go to article overview

Is GSE Report A Setback for Reformers?


Blackwell, Rob, Rucker, Patrick, American Banker


WASHINGTON -- The government-sponsored enterprises turned a political corner Thursday as a key investigation of Fannie Mae turned up no new problems -- robbing critics of ammunition needed to move reform legislation.

Reform proponents, by insisting on ever-tougher limits on GSE operations, may have missed the chance to get something enacted.

"This report reinforces our view that the worst of the GSE scandals is past," Jaret Seiberg, a policy analyst with Stanford Washington Research Group, wrote in a client report. "Each day that passes takes us another day away from the scandal. That makes it increasingly tough for GSE critics to achieve their goal of restricting the retained mortgage portfolios."

The report, released Thursday, did criticize Fannie's accounting procedures, culture, and former management, but it did not make additional allegations. The GSEs have been under siege since 2003, when Freddie Mac announced that accounting errors would force it to restate three years of earnings.

Bush administration officials, pointing to the report's conclusion that Fannie had an unhealthy emphasis on earnings, insisted it adds impetus to a bill.

The report confirms "this link that we have been trying to stress, which is that you have portfolios that are a) creating systemic risk and b) are unrelated to the mission of the enterprises," Randal Quarles, the Treasury Department undersecretary for domestic finance, said at a press conference.

"Now you have an independent review by a very respected lawyer and his colleagues that exposes what the culture was at the time the portfolio was being created. ... It was a culture focused on increasing earnings growth ... by any means possible," he said.

Fannie hired former Sen. Warren Rudman to lead the investigation, and after 17 months, he delivered a 2,652-page report.

The administration has demanded any reform bill limit the GSEs' portfolios.

Senate Banking Committee Chairman Richard Shelby, the author of a bill that includes strict portfolio limits, agreed with that demand.

"Many of these issues arose because of the large retained portfolio held by Fannie Mae," he said in a press release. "While a portfolio of this size is not a critical component in achieving their housing mission, it did serve as a mechanism to allow Fannie Mae to ensure earnings growth."

But most observers said the report will allow Fannie -- substantially weakened after it announced in December 2004 that it had to restate $11 billion of earnings for 2001 through 2003 -- to rebuild its influence.

The report "strengthens the political hand" of both Fannie and Freddie and "seems to go out of the way to clear current management," said Brian Gardner, a vice president at Keefe, Bruyette & Woods Inc.

He also said the report "bolsters the political standing" of Dan Mudd, who became Fannie's chief executive officer last year and is credited in the report with rehabilitating the GSE. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Is GSE Report A Setback for Reformers?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.