WASHINGTON - A group of academics and former financial services regulators said Monday that legislation to place the secondary mortgage market giants Fannie Mae and Freddie Mac under the supervision of the Federal Reserve Board is fatally flawed.

The members of the Shadow Financial Regulatory Committee, though generally supportive of the bill introduced by Rep. Richard H. Baker, R-La., said that the central bank is too fearful of losing its independence to engage in political warfare that would be necessary to rein in the two government sponsored enterprises.

Peter J. Wallison, a resident fellow of the American Enterprise Institute, said that because of the political interests associated with the GSEs, such as the real estate lobby and the homebuilders lobby, "it will be extremely difficult for the Fed to interfere in a process like that and still maintain the very good relationships it wants on the Hill."

The central bank, Mr. Wallison said, is "always afraid there will be legislation or some effort to restrict the Fed's independence."

The Shadow Committee argued that the Treasury Department is the better choice for a GSE regulator. This is partly because that agency is committed to providing the GSEs with $2.25 billion in emergency funding if they run into financial problems.

The Shadow Committee said the bill fails to provide adequate guidance for whoever the GSEs' new regulator turns out to be. Mr. Wallison argued that the GSEs' extensive charters are too broad and too open to interpretation. Meaningful regulation of Fannie and Freddie, including steps to keep them from engaging in businesses outside their charters, is impossible unless the charters are simplified, he said.

Departing from the Baker bill, the committee also criticized an element of the voluntary agreement Fannie and Freddie struck with Rep. Baker last October. The agreement, intended to reduce the GSEs' risk of failure, required them to issue subordinated debt on a regular basis. Subordinated debt holders are the least senior of all creditors, the first to lose their money in the event of default. For that reason, the rate a company must pay to issue subordinated debt is supposed to indicate the market's belief in its soundness.

But Charles W. Calomiris, a Columbia University finance professor, called the program "a farce." He said that the agreement requires the GSEs to issue too little debt, which creates a price-distorting "liquidity premium," and that the agreement creates so many safety nets that subordinated debt holders are not really at risk of a loss.

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