Bush Rejects Broader Role for Fannie and Freddie to Resolve Mortgage Crisis

WASHINGTON – President Bush yesterday rejected a expanded role for Fannie Mae and Freddie Mac in resolving the spreading mortgage crisis, saying the two secondary market giants need to stick to their knitting of buying and selling residential mortgages before they are given broader powers. The President was responding to a request by Fannie Mae CEO Daniel Mudd that Fannie be allowed to buy more mortgages, in order to add liquidity to the troubled mortgage market. But Bush reiterated his position that the mortgage holdings of the two secondary market giants need to be strictly limited. "First things first when it comes to those institutions," said the President. "Congress needs to get them reformed; get them streamlined. Get them focused, and then I will consider other options." Mudd joined Democratic Senate leaders this week in calling on regulators to lift the cap on mortgages held by Fannie, currently, $1.4 Trillion, in order to ease liquidity constraints in the mortgage market. The President’s remarks signaled the Administration is still at loggerheads with Congress on plans to reform the secondary market, which would set new oversight for Fannie and Freddie and the 12 Federal Home Loan Banks.