Treasury Eyes Fannie and Freddie ..........................

[cthrumatrix]

Treasury Eyes Fannie and Freddie
Snow Says His Department Would Offer Better Oversight
By Kathleen Day
Washington Post Staff Writer
Thursday, September 11, 2003; Page E01


Treasury Secretary John W. Snow asked Congress yesterday to give his agency oversight of the nation's two largest mortgage-finance companies -- Fannie Mae and Freddie Mac -- to ensure they are run safely.

Speaking for the Bush administration, Snow also said Congress should end a decades-old policy of letting the president appoint five members of each company's 18-person board. And he asked that Congress give up its power to review the regulator's budget, a process that lobbyists from the two companies have used to delay or block unwanted scrutiny.

Snow's recommendations to the House Financial Services Committee reflect changes that many Treasury officials under the last two administrations have favored because Fannie Mae and Freddie Mac have become so large and play such an important role in the housing and securities markets.

Until now, however, such recommendations faced little chance of becoming law because the two companies opposed tighter regulation and their lobbying was simply too powerful. That changed this year, however, with the unfolding of accounting problems at Freddie Mac that forced the company to oust two chief executives and to restate financial results by as much as $4.5 billion over the past three years.

snip

http://www.washingtonpost.com/wp-dyn/articles/A57430-2003Sep10.html

The timing of this move is very odd....NOT. Recently, several mortgage banks (Wells Fargo, Washington Mutual etc..) have really taken it on the chin with the RAPID RISE in INTEREST RATES. As much as they modeled to financially protect themselves....it didn't work and they are incurring large losses. Hence you saw the market reaction.

Call me cynical...but I think this would hide the problems of Freddie and Fannie. They created the housing bubble (on some level) by reducing the requirements for mortgage (no money down etc). And they have a big mess on thier hands.

This is not a little announcement. Improper hedging to prepare for the rise in rates ....could mean problems for both.

Better oversight IMHO is we will never know what's going on.

[w4rma]

1. As long as Congress doesn't give up any power, I'm ambivalent (n/t)

[ozone_man]

2. That was my take also.

"Better oversight IMHO is we will never know what's going on."

I think this is a derivative time bomb waiting to go off and this move by the Treasury seems like a way to hide things.