The Christian Science Monitor weighs in on the House bill introduced by Rep. Richard Baker that would bring stronger regulatory oversight to mortgage behemoths Fannie Mae and Freddie Mac:
- Fannie and Freddie have expanded beyond their original government charter of providing affordable housing to low-income Americans - so much so, they now control half of the $7.6 trillion US mortgage market. Their portfolios grew some tenfold between 1990 and 2003. Critics contend they've used those portfolios simply to generate profits for their stockholders, not to further their charter.
If they failed, taxpayers could be forced to pay off the mortgage duo's debts because of their quasi-governmental status, which includes a nominal line of credit with the Treasury Department that allows them to undercut the banks by borrowing at below-market rates.
Fan and Fred's intense lobbying, together with a currently weak regulator, has let them balloon in size for years. But both were recently red-faced by nothing less than multibillion-dollar scandals that used accounting tricks to smooth earnings.
For Fannie, that meant being forced to restate an estimated $11 billion in earnings going back to 2001. In 2003, Freddie was forced to reduce its earnings by $5 billion - proof positive a new regulator with enhanced oversight powers is in order.
Earlier this year, the CSM called for privatizing Fannie and Freddie in light of evidence that -- contrary to their original mission -- they aren't buying as many mortgages of low-income borrowers as private banks are.
It's not clear whether this is a retreat from CSM's earlier position, or if it's just a case of hitching on to what they perceive as a more expedient reform option.
Here are some other related articles on the proposed bill: