Statements and Speeches

Government Sponsored Enterprise Reform

Opening Statement: Senate Committee on Banking, Housing and Urban Affairs

Feb 07 2008

Why We Need a New GSE Regulator

  • Fannie Mae and Freddie Mac are the backbone of a mortgage market that is reeling from the subprime crisis.
  • As we have seen this year, Subprime mortgages have destroyed the private label Mortgage Backed Securities Market.
  • It is as if a hole has been punched in a bucket and all of the liquidity in the mortgage market has drained out.

Role GSEs Play To Help the Economy

  • In order to bring liquidity back into the market we must use the Government Sponsored Enterprises.
  • The Federal Home Loan Banks have stepped up to this task.
  • Federal Home Loan Bank advances have increased dramatically over the last year from approximately $600 billion to almost $900 billion.
  • The Stimulus package includes a provision to raise the conforming loan limit for Fannie Mae and Freddie Mac to $730,000.
  • This will certainly provide needed liquidity to the market by expanding the mortgage backed securities that are guaranteed against credit losses, to include mortgages much higher than the $417,000 limit under current law.

Added Risks Equals Need for Stronger Regulator

  • While this will help, it will bring added risks to the Enterprises.
  • We must take steps to bring the regulator into the 21st century.
  • We have debated this issue over the years and sadly we have not resolved our differences.
  • We now have serious challenges facing our economy and now is the time to bring confidence back to the mortgage markets.  
  • It is my intention to work with the Chairman and Ranking Member and every other member of this committee to find common ground on our outstanding issues.


  • Some of the issues we have argued over in the past have been overtaken by market events.  Because time is of the essence, I would hope that we could use the House passed bill as a starting point.  
  • I have some issues with some of the provisions of the bill, but it is a good middle ground and we can build on the consensus reached by Chairman Frank and Secretary Paulson.

Key Provisions of a Good GSE bill

  • With that said, any bill we debate should have the following key provisions
  • New regulator with combined authority, should be independent
  • New regulator should be able to set minimum capital requirement
  • New regulator should have enhanced enforcement authorities
  • Ability to approve new activities
  • Affordable Housing Fund
  • Ability to adjust the Retained portfolio


  • We are all searching for ways to help a distressed housing market.  There are $6 trillion of GSE securities currently in the market.  We need to do everything we can to maintain confidence in the GSEs and their securities.  The best way to maintain confidence is to create a regulator that will have the authority and the stature to calm the markets.