the House Republican leadership dropped a proposal to require them to help pay for the savings and loan bailout. But for the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. - Fannie Mae and Freddie Mac - there may still be some hostile fire ahead. A memo prepared for the House Banking Committee by the Library of Congress's Congressional Research Service makes a strong case for assessing Fannie and Freddie to pay for the Fico bonds sold in an early effort to bail out the thrift insurance fund. It's the kind of case that bank lobbyists wish Rep. Jim Leach had made to his House colleagues before proposing that Congress stick the two agencies with the Fico tab. Had he laid the groundwork, they said, the plan might have gotten a fair hearing. The Congressional Research Service enjoys considerable respect on Capitol Hill for its studious issue briefs. And that's one reason that the Leach proposal may still be considered. "It won't go away, for the same reason that the idea of taxing credit unions won't go away," said analyst Bert Ely. "The more people hear about it, the harder it is to justify the special considerations they receive." Those considerations were at the heart of Rep. Leach's argument that the agencies should be assessed to pay for the thrift bailout. The two agencies are exempt from state and local taxation, as well as securities registration fees. In addition, they borrow at low rates because of their implicit federal backing. Special treatment may have been necessary at one time to encourage creation of a secondary market, but those days have passed, the research service said. Continued subsidies have the effect of conferring above- market returns and discouraging competition. The Congressional Research Service argues in its memo that Fannie and Freddie use those advantages to compete against bank and thrift portfolio lenders - institutions that hold mortgages on their books rather than sell them on the secondary market. But the big issue raised by the study is whether an assessment on the agencies amounts to "a tax on home ownership," as they have always argued. The study concludes that it does not. "At most, the fees would partially remove a subsidy," the research service concluded. Fannie and Freddie would still be better off than private-sector lenders because of the special considerations they enjoy, the study argues. And if the levy on Fannie and Freddie had the effect of lowering the fees thrifts would pay for the bailout, "there is little reason to expect mortgage interest rates to rise," the study concludes. Mr. Ely sees one other reason to assess Fannie and Freddie for the cleanup. The secondary market agencies, he said, have had the effect of narrowing spreads received by mortgage portfolio lenders by as much as 40 basis points, a trend that exacerbated the thrift crisis of the 1980s. It would be one thing, he said, if the spreads were narrowed purely by market forces. But Freddie and Fannie were aided by government subsidies. Fannie Mae, for one, takes strong exception to the study. "The question is, 'How best do you get low mortgage rates to the consumers who deserve them the most?'" said David Jeffers, a spokesman for Fannie. "All the advantages that Fannie is given are passed through directly to homebuyers," he added. But bank lobbyists remain hopeful that it is still possible to saddle Fannie and Freddie with part of the bailout tab assessment, particularly if the current budget bill is torpedoed. The budget legislation that includes the Fico measure is the subject of a high-stakes debate between Congress and the White House. "It's a long shot - for this Congress and for the Fico bill," said Edward L. Yingling, the American Bankers Association's top lobbyist. "But it's still possible."
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