WASHINGTON - If Armando Falcon, the director of the Office of Federal Housing Enterprise Oversight, was feeling a slight case of whiplash as he left congressional hearings on Wednesday, he could blame the barrage of mixed messages he had received from lawmakers.

During a hearing on his agency's long-awaited rule establishing risk-based capital standards for Fannie Mae and Freddie Mac, members of the House Financial Services capital markets subcommittee alternately lavished praise on him for guiding his agency to the completion of a rule seven years in the making - and warned him that he had better be prepared to change it.

The hearing was called by Rep. Richard H. Baker, R-La., whose subcommittee has jurisdiction over the two government-sponsored enterprises. Rep. Baker has been critical of OFHEO in the past for its delay in implementing the rule, and even proposed legislation that would abolish the agency and put the GSEs under the regulation of the Federal Reserve Board.

In his opening remarks Rep. Baker praised the rule as "a pretty good piece of work," but in a prepared statement he said it is "premature to say the rule will remedy all of my concerns about safety and soundness." He added that OFHEO should expect a series of hearings to explore "the workability of this rule and, most importantly, its effectiveness."

Typical of the lawmakers at the hearing was Rep. Ken Bentsen, D-Tex., who began his opening remarks by congratulating his fellow Texan on completing the final rule and praising him and his employees for their work. In his questions to Mr. Falcon, however, he made it clear that he does not view the rule as a finished product.

"I commend OFHEO staff for the work that they have done, but as you all know, this is not the last word - either on the rule or the question of the GSEs," Rep. Bentsen said.

Rep. Spencer Bachus, R-Ala., was more blunt. "I hope this isn't considered a final rule," he told Mr. Falcon.

Several lawmakers on both sides of the aisle, including Rep. Robert W. Ney, R-Ohio, and Rep. Ruben Hinojosa, D-Tex., urged Mr. Falcon to work closely with Fannie and Freddie to correct any problems that may arise during the rule's implementation.

In his responses Mr. Falcon repeatedly assured the legislators that he and his agency remain open to what the GSEs have to say, and he promised to move "expeditiously" to remedy any problems or errors.

Rep. Bentsen called for more hearings to solicit comments from other mortgage market participants and from ratings agencies such as Standard & Poor's and Moody's Investors Service. Rep. Baker said he supported seeking such input.

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