WASHINGTON — Federal Reserve Board Chairman Ben Bernanke signaled his support Wednesday for efforts that would require Fannie Mae and Freddie Mac to contribute a portion of their profits to an affordable housing fund.

"It would be a good thing for the GSE portfolios to be more consistent with their mission," he told the Senate Banking Committee, pointing out that 30% of the portfolios are tied to affordable housing. "If they matched their mission with their portfolios, that would be desirable."

In his semiannual monetary policy update to Congress, Mr. Bernanke also said the Fed is moving forward with revisions to Regulation Z, and he reiterated his opposition to commercial firms' winning charters for industrial loan companies.

But his support of the fund put the Fed chief in the middle of a fierce debate on Capitol Hill over how to reform government-sponsored enterprise regulation.

House Financial Services Committee Chairman Barney Frank has championed the fund and has indicated he would not accept a bill that did not include it. But the proposal ran into trouble last month when Rep. Spencer Bachus, the House panel's top Republican, wrote Rep. Frank a letter saying Republicans would not support creating the fund.

After Mr. Bernanke's three-hour testimony, Senate Banking Committee Chairman Christopher Dodd told reporters that passing a GSE bill is one of his top priorities, but he also said the Senate likely would approve a version different from the House one.

"We need to have our own Senate bill," he said. "I suspect it will be somewhat different than the House bill."

During his testimony, Mr. Bernanke continued to stand by the Fed's opposition to commercial firms' owning ILCs. Like his predecessor, Alan Greenspan, Mr. Bernanke has maintained that an ILC parent should be subject to the same Fed supervision as a bank holding company.

But when Sen. Dodd asked whether Mr. Bernanke was simply protecting the Fed's turf as a bank regulator, he responded that he would not oppose giving the Federal Deposit Insurance Corp. the power to oversee ILC parents, as long as commercial firms were not allowed to own ILCs.

"If the ILC exemption is limited, we are perfectly comfortable with the FDIC doing consolidated supervision," the Fed chief said.

Mr. Bernanke also responded to Sen. Dodd's concerns about abusive practices at credit card companies. The Fed chief said the central bank continued to review revisions to Reg Z, which implements the Truth-in-Lending Act, and would issue a proposed rule "in a few months."

Sen. Dodd and other consumer activists have pushed the Fed to revise Reg Z to require card issuers to make certain disclosures more clear. But Mr. Bernanke said such an effort presents some difficulties for regulators.

"One of the real challenges in improving disclosures in credit cards and other types of lending is to make the language both compliant with legal requirements but also clear and understandable," he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.