Regulatory Watch: Baker Wants the Fed to Hold Reins on Fannie Mae and Freddie Mac.(Congressman Richard Baker, Federal Home Loan Mortgage Corp., Federal National Mortgage Association)(Brief Article)

Though much of the interest in overhauling regulation of the government-sponsored enterprises has died down since Fannie Mae and Freddie Mac entered into voluntary risk management agreements last fall, Congressman Richard Baker, R. La., has introduced a bill that would place the GSEs under a tougher regulator.

The bill (H.R. 1409) would abolish the GSEs' current safety and soundness supervisor-the Office of Federal Housing Enterprise Oversight-and set up a bank-like regulatory regime under the Federal Reserve Board.

GSE critics, such as FM Watch, have complained the HUD has failed to stop "mission creep" by allowing Fannie and Freddie to engage in new activities that compete with private sector companies and go beyond the original mission.

So far, the Fed has not indicated whether it is willing to accept this new regulatory role.

But Rep. Baker justified his choice of the Fed by saying Fannie and Freddie are the "most important banking enterprises in the world" and they need a regulator with the stature and credibility of the Federal Reserve Board to oversee their operations.

He also told reporters that Fannie and Freddie debt exceeds $1 trillion and it is not only held by private investors, but by federally insured banks and foreign central banks.

"Should they have difficulty, the ...