Riegle's Plan for Regulating Mortgage-Market Agencies

WASHINGTON -- Aides to Senate Banking Committee Chairman Donald W. Riegle are circulating a proposal for radical overhaul of the way Fannie Mae, Freddie Mac, and the Federal Home Loan Banks are regulated.

Sen. Riegle's draft legislation calls for an independent regulator to oversee the mortgage-market agencies, which together have nearly $1 trillion in outstanding obligations.

But the Michigan Democrat faces an uphill battle. At least two rival proposals are in the works. And because Sen. Riegle appears in no rush to push a bill through his committee, other senators will have time to drum up support for alternatives.

Enhanced Finance Board

Sen. Riegle's proposal would assign oversight to a revamped Federal Housing Finance Board, the agency that now regulates the regional Federal Home Loan Banks. Jurisdiction over Fannie Mae and Freddie Mac -- formally, the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. -- would be transferred to the finance board from the Department of Housing and Urban Development.

The proposal would scrap the current five-member finance board, replacing it with a three-member panel consisting of a full-time chairman, the secretary of Housing and Urban Development, and the Fed chairman.

The measure would also reduce the number of Federal Home Loan Banks to five, or fewer, from 12.

A bill passed by the House of Representatives last month creates an arms-length agency within HUD to oversee Fannie Mae and Freddie Mac. It left the Home Loan Banks under the finance board.

Bush Opposes House Measure

The Bush administration opposes the House bill because it dilutes HUD's authority.

Industry lobbyists said Fannie Mae, which wants to remain under HUD's wing, has drafted an alternative Senate bill, modeled on the House measure.

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