Greenspan Urges Greater Reigns On FannieAnd Freddie

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WASHINGTON - (02/18/05) -- Federal Reserve Chairman AlanGreenspan said any new regulatory scheme for secondary mortgagemarket giants Fannie Mae and Freddie Mac should include caps, evencuts, on the huge mortgage portfolios the two can hold to avoid'almost inevitable' problems for the U.S. financial system.Greenspan, testifying before the House Financial ServicesCommittee, said he thought continued growth in the huge mortgageportfolios held by Fannie and Freddie could pose significant risk.He said growth of the portfolios, which together amount to morethan $1.5 trillion of American home loans, primarily allows thecompanies to leverage their government sponsored charters togenerate substantial profits. Congress, he said, should passlegislation requiring them to divest part of their holdings, theFed Chairman said. Congress is weighing several proposals thatwould tighten federal oversight of the two mortgage giants, as wellas sister government sponsored mortgage enterprise, the FederalHome Loan Banks.

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