WASHINGTON - Rep. Barney Frank, D-Mass., on Tuesday accused the Bush administration of exaggerating the risk of failure at Fannie Mae and Freddie Mac and of torpedoing reform legislation in the process.
Rep. Frank, the ranking Democrat on the House Financial Services Committee, said he was "baffled" that so much attention had been devoted to whether the federal government should be able to put the companies into receivership in the event of a financial crisis.
"I think it is an artificial issue created by the administration," he said in a speech at a Mortgage Bankers Association conference. "People tend to pay their mortgages. I don't think we are in any remote danger here. This focus on receivership, I think, is intended to create fears that aren't there."
Wayne Abernathy, the Treasury Department assistant secretary for financial institutions, did not directly respond to Rep. Frank's criticism when he took the same podium later, but he reiterated the dangers if a sweeping overhaul of GSE regulation is not enacted and one of the companies were to run aground.
"Anybody know what happens if one of these GSEs should become insolvent?" he asked the audience. "You know what the answer is? Chaos. There is no governing authority."
Rep. Frank said the administration's hard line had prevented deals from being cut that could have drawn broad support.
