WASHINGTON — Rep. Richard Baker on Thursday reiterated that nearly every part of his controversial bill to transfer oversight of Fannie Mae and Freddie Mac to the Federal Reserve Board is negotiable but stood firm on eliminating the Office of Federal Housing Enterprise Oversight.

The Louisiana Republican, who chairs the House Financial Services subcommittee with jurisdiction over Fannie and Freddie, sharply criticized OFHEO for its failure to develop a risk-based capital standard for the government-sponsored mortgage companies, which its 1992 charter required.

“I don’t think I can point to anything other than their resume in saying they are inadequate to complete the task,” Rep. Baker said.

Additionally, he said, the nine-year delay in promulgating the rule has made it impossible that even a revamped version of the agency would ever be seen as a credible regulator by the financial markets.

“There is now … a view of OFHEO that will never allow them to attain the stature in the markets that would assure outside investors looking to buy a Fannie or Freddie product that the regulatory oversight is sufficient to adequately gauge their level of risk,” he said. “I think it requires someone of the stature of the Federal Reserve … to say the enterprises are safe, sound and functioning properly and to have credibility.”

Director Armando Falcon Jr. defended his agency in an interview Thursday. “I have to respectfully disagree with the congressman. I think we are respected on Wall Street,” he said. “I meet with Wall Street analysts in New York and in Washington all the time. If we weren’t respected, I don’t think they would want to spend that much time with me.”

Regarding the delay in promulgating the risk-based capital rule, he said: “Congressman Baker is a very thoughtful member of the committee and has been a supporter of OFHEO and its goals. I understand his frustrations with the risk-based capital rules.”

Still, he maintained, “OFHEO is a strong and effective regulator and I will continue to do what I can to demonstrate that it is the regulator that everyone wants.”

Keefe, Bruyette & Woods Inc. analyst David Graifman seemed to agree, saying that in Mr. Falcon, who has only been at the agency since late 1999, “they finally have someone there who is doing something to fulfill their mission.”

Given the proper tools and funding, he said, “OFHEO could be a fine regulator.”

The agency has certainly been acting as though there is no doubt about its future. On Monday it issued two rules outlining how the agency collects assessments from the GSEs and amending its procedures for taking action to enforce compliance with safety-and-soundness guidelines.

On Wednesday, it requested comment on a pair of proposals. One of the proposals would allow the agency to take “prompt corrective action” if the GSEs’ capital falls below a certain level. The other would “formalize existing business practices” at the GSEs.

Rep. Baker’s bill was the target of harsh criticism after it was proposed, particularly from the Democratic side of the aisle. Rep. Paul E. Kanjorski, the ranking Democrat on Mr. Baker’s subcommittee, released a statement late Wednesday decrying the bill as “a solution in search of a problem.”

The future of the bill appears to hinge largely on negotiations between Rep. Baker and the two GSEs.

In reference to a meeting with Fannie and Freddie lobbyists Wednesday, he said: “I had a very intense discussion yesterday with both the GSEs and indicated my willingness to listen to any proposal that they may wish to offer. If they can establish a plan in which they have confidence and which in my view creates a credible regulator, I can support that.”

Fannie spokesman Robert McCarson said Thursday: “It has become clear over the last day or so from the reaction of lawmakers, other policymakers, and industry participants that Congressman Baker’s approach raises multiple concerns. We had a constructive meeting with Rep. Baker yesterday and we will continue to work with him, with Congressman Kanjorski, other members of Congress, and other policymakers to ensure the existence of a strong and effective regulator for Fannie Mae while protecting our mission and operations.”

A Freddie spokeswoman had previously indicated a willingness to work with Rep. Baker to modify the bill.

Rep. Baker said that he has promised House Financial Services committee Chairman Michael G. Oxley, R-Ohio, that he will not attempt to hurry the bill through his committee. “I have assured him there will be no rush or pressure from me to act,” he said, noting that he expects Rep. Oxley to consult with the committee’s ranking Democrat, John J. LaFalce, D-N.Y.

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