Housing regulators on Thursday panned a proposal that would consolidate oversight of government-sponsored enterprises into one agency.
"We believe the existing structure is working well, and we see no compelling reason for change," Nicolas P. Retsinas, assistant secretary in the Department of Housing and Urban Development, told the House Banking Committee's capital markets subcommittee.
Rep. Richard Baker, the panel's chairman, said in an interview that next year he plans to introduce a bill that would merge oversight of the 12 Federal Home Loan banks, Fannie Mae, and Freddie Mac.
The General Accounting Office in a July 9 report concurred with Mr. Baker's view, finding that the housing GSE regulators would be more effective if combined.
The notion drew fire from Mark Kinsey, acting director of the Office of Federal Housing Enterprise Oversight, which supervises Fannie Mae and Freddie Mac for safety and soundness.
"The key to an efficient combined structure is effective communication, not whether the regulatory components are housed under the same roof or report to the same person," Mr. Kinsey said.
He argued that his agency and HUD, which both ensure that Fannie and Freddie are meeting their housing mission goals, work well together.
Several Democratic lawmakers also rejected the idea of combining the regulators.
"A merger will not result in any direct cost savings to taxpayers because the housing GSEs pay for the cost of their safety and soundness regulation through user fees," said Rep. Paul E. Kanjorski, D-Pa.
Pursuing a regulatory merger may hinder the progress of legislation to modernize the Federal Home Loan Bank System, he added. That measure is folded into the financial modernization legislation approved by House Banking June 20.
Regardless, Rep. Baker said that consolidating the regulators would reduce risk.
"With close to $1.7 trillion in implicit federal backing amounting to almost 12% of all outstanding credit in the United States, the housing GSEs represent a considerable risk that warrants the most effective regulation," Rep. Baker said.
Of the three regulators testifying, only Federal Housing Finance Board Chairman Bruce A. Morrison supported Rep. Baker's plan.
"The net result would be more effective, consistent regulation," Mr. Morrison said. "The broader mix of competitive entities to be regulated would enhance the independence of the oversight process ... and assure more evenhanded regulatory treatment."
However, Mr. Morrison also took issue with the GAO report, which criticized his agency's policy of appointing "public interest" directors to the boards of Federal Home Loan banks.
"The regulator has a strong overriding interest in identifying and selecting individuals with backgrounds and personalities that will add real strength to the boards," Mr. Morrison said.