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Fannie Mae , Freddie Mac fiscally sound, panel told
The Advocate (Baton Rouge, La.) - May 17, 2000
Author: JOAN McKINNEY

The chief executives who run Fannie Mae and Freddie Mac told Congress Tuesday that they’re meeting their mandate to make home ownership “affordable,” and that their enterprises are financially strong.

They said their operations are virtually collapse-proof and pose no risk to taxpayers.

The testimony came at a hearing of a U.S. House banking subcommittee, chaired by U.S. Rep. Richard Baker , R-Baton Rouge. Baker has proposed a regulatory overhaul of Fannie Mae , Freddie Mac and the Federal Home Loan Bank - also known as GSEs (or government-sponsored enterprises).

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Baker’s allies, mostly Republican subcommittee members, likened the situation to taxpayer exposures during the 1980s collapses of banks and thrifts, when government insurance funds were forced to pay off depositors.

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“There’s no conceivable default” under Fannie Mae’s current capital structure, Raines said. Even if the enterprise faced bankruptcy, its regulators would force a sell-off of assets, which are easily sold because they are, in essence, backed by equity in houses, Raines testified.

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Critics seek to curb power of Fannie Mae , Freddie Mac
Star-Ledger, The (Newark, NJ) - July 9, 2000
Author: Pamela Yip, DALLAS MORNING NEWS

EXCERPT

Too much influence, say critics who are seeking to curb the power of Fannie and Freddie. They say the companies have gotten too big and pose a serious risk if the economy gets into real trouble and the government has to bail them out.

One of the critics , U.S. Rep. Richard Baker (R-La.), is sponsoring legislation that would streamline oversight of Fannie Mae and Freddie Mac and remove what critics call their line of credit with the U.S. Treasury Department.

“I have long been a strong supporter of the mission that Fannie and Freddie were designed to fulfill,” said Baker, chairman of the House Banking Subcommittee on Capital Markets, Securities and Government-Sponsored Enterprises. “Clearly, American home ownership has benefited by the existence of a strong secondary mortgage market, and I would never support legislation that would weaken the secondary market.”

At the same time, he also wants to ensure that “taxpayers are not left to pay off the debt of these enterprises,” Baker said.

Fannie Mae and Freddie Mac issue debt to finance their purchases of mortgages from lenders.

“Keep in mind, any profits they make, they keep,” Baker said. “If there are any losses, taxpayers pay. Not a bad deal, wouldn’t you say?”

Baker’s bill, called the Housing Finance Regulatory Improvement Act, is scheduled for committee hearings. Baker said he doesn’t expect it to pass this year, although that could change if momentum picks up.