WASHINGTON — A bill expected to be introduced in the House Wednesday would put Fannie Mae and Freddie Mac under the supervision of the Federal Reserve Board, requiring the secondary mortgage market giants to get the central bank’s approval before entering new businesses.

The bill, a draft copy of which was obtained by American Banker, would direct the central bank to allow new activities only if they are “in the public interest,” and would give the Fed authority to review the government-sponsored enterprises’ current activities for compliance with their charters.

The bill is the latest attempt by Rep. Richard Baker to overhaul oversight of Fannie and Freddie. The Louisiana Republican wants to abolish the current regulatory structure, which places safety and soundness supervision with the Office of Federal Housing Enterprise Oversight and charter compliance with the Department of Housing and Urban Development.

If the bill were to pass, HUD would retain the authority to enforce the Fair Housing Act. The oversight office would cease to exist.

The GSEs’ access to their so-called “lines of credit” with the U.S. Treasury would be restricted by the proposal. The Treasury Department, at its discretion, is currently allowed to buy $2.25 billion of securities from Fannie and Freddie to provide liquidity. Under the Baker bill, such a purchase could only occur at the specific request of the Fed.

The bill would give the central bank the authority to set regulatory capital levels for the GSEs, and would require the Fed to take “prompt corrective action” if their capital falls below a certain level.

Enlisting the Fed as an ally could improve the long odds Rep. Baker’s bill faces. The lawmaker, who chairs the House Financial Services Committee’s panel with jurisdiction over government-sponsored enterprises, declined to comment Tuesday, but plans to hold a news conference no later than Thursday to discuss the measure.

A Fed representative said the agency would not comment before the bill is introduced.

Rep. Baker will also need the support of Senate Banking Committee Chairman Phil Gramm. The Texas Republican indicated Tuesday that he has not decided if he will back the Baker measure. “I am praying over it,” was all he would say.

Freddie spokeswoman Sharon McHale attacked the proposal on Tuesday. “We have seen the bill and we believe it imposes a very burdensome and unworkable regulatory structure. It is trying to solve problems that simply don’t exist,” she said.

Ms. McHale called the proposal disconcerting. “It contradicts Rep. Baker’s own statements that his goal with the legislation was to establish a regulatory structure he felt comfortable with and to ensure our safety and soundness,” she said. “This is far afield from safety and soundness. It rewrites our charter, our entire relationship with the government.”

A Fannie spokesman was less direct, saying, “We will not comment on the bill until it has been introduced and we have had time to study it.”

Fannie and Freddie, which buy mortgages from lenders and repackage them as securities, have been subject to intense criticism in recent years from financial services lobbying groups. Critics have complained that the GSEs use their position as a government-chartered entity to intimidate customers and potential competitors, that their outstanding debt securities create a systemic risk for the financial services industry, and that access to Treasury funds gives them an unfair advantage over competitors by lowering their cost of funds.

The bill would address many of the critics’ concerns.

Among other things, it would make the GSEs’ operations much more transparent, requiring annual reports on their business and financial condition. Additionally, the Fed would be required to submit five annual reports to Congress. The reports would address the amount of GSE debt held by banks whose deposits are backed by the Federal Deposit Insurance Corp.; the GSEs’ operations, risk management procedures, and mission; the amount of debt issued by the agencies; their access to Treasury funds; and their compliance with a voluntary agreement reached with Congress last year that requires them to take certain steps to improve disclosure and risk management.

The bill would also eliminate Fannie and Freddie’s current exemption from Securities and Exchange Commission rules that require companies to file registration statements before issuing securities.

The bill would represent a change of course for Rep. Baker, who last year proposed that regulation of Fannie, Freddie, and the Federal Home Loan Banks should be consolidated into one agency. Under that bill, the Fed would not have played a role, but the Office of Federal Housing Enterprise Oversight and the Federal Housing Finance Board would have been combined to form a new agency that also would have inherited HUD’s jurisdiction over Fannie and Freddie.

That bill stalled, but Rep. Baker’s effort led to a deal under which Fannie and Freddie agreed to increase public disclosures about their activities and improve their risk management techniques.

Though Rep. Baker has retooled his bill in light of that agreement, he has argued that legislation is still needed because the oversight office is small and does not have the same enforcement tools as banking regulators.

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