New York Times 2003: Dems Oppose Bush Plan To Rein in Fannie and Freddie | The Patriot Room The New York Times from September 11, 2003. The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago. Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry. The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios. The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac which together have issued more than $1.5 trillion in outstanding debt is broken. A report by outside investigators in July concluded that Freddie Mac manipulated its accounting to mislead investors, and critics have said Fannie Mae does not adequately hedge against rising interest rates. There is a general recognition that the supervisory system for housing-related government-sponsored enterprises neither has the tools, nor the stature, to deal effectively with the current size, complexity and importance of these enterprises, Treasury Secretary John W. Snow told the House Financial Services Committee in an appearance with Housing Secretary Mel Martinez, who also backed the plan. Mr. Snow said that Congress should eliminate the power of the president to appoint directors to the companies, a sign that the administration is less concerned about the perks of patronage than it is about the potential political problems associated with any new difficulties arising at the companies. The administrations proposal, which was endorsed in large part today by Fannie Mae and Freddie Mac, would not repeal the significant government subsidies granted to the two companies. And it does not alter the implicit guarantee that Washington will bail the companies out if they run into financial difficulty; that perception enables them to issue debt at significantly lower rates than their competitors. Nor would it remove the companies exemptions from taxes and antifraud provisions of federal securities laws. Obamas current mortgage and housing advisor, Franklin Raines, was at the helm at the time of Fannie Mae at the time. Keep in mind, this is the guy that ran the thing right into the ground in the succeeding years. Despite the attempt to curb the waste, fraud, and abuse, some Democrats were not on board. Barney Frank really looks like a genius on this one. And this guy was the ranking member on the Financial Services Committee. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing. These two entities Fannie Mae and Freddie Mac are not facing any kind of financial crisis, said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing. Representative Melvin L. Watt, Democrat of North Carolina, agreed. I dont see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing, Mr. Watt said. Yeah we need more stuff taken over and managed by the Federal Government. Those guys are really good at finance and mortages. Maybe when Obama wins he can make Franklin Raines the Treasury Secretary. That would sure be a change. Lets bring crime, corruption, and mismanagement to the Cabinet level.