Greenspan Faults GSEs.

Proving once again that he's no friend of the GSEs, Federal Reserve chairman Alan Greenspan last week implored Congress to curb their growth and even privatize them.

But most members of the Senate Banking Committee weren't buying, especially chairman Richard Shelby, R-Ala., who made it clear to reporters after two days of hearings that he has no intention of limiting the growth of Fannie Mae and Freddie Mac.

Politically speaking, privatization isn't an issue as Congress considers legislation to create a strong independent regulator for the two as well as the Federal Home Loan Bank System.

However, the committee chairman, a key player in shaping legislation to strengthen GSE regulation, said members of the panel are cognizant of chairman Greenspan's concerns about their growth, size and potential risk to the U.S. economy.

Mr. Greenspan previously had shocked the industry somewhat by saying that as a "goal" he favors privatizing the two mortgage giants and at the very least he would like to see some type of limits on their growth by putting constraints on their debt issuance.

"I think a lot of the industry was surprised at what Greenspan said," noted one mortgage official. "I don't think anyone thought he would say it this strongly."

It's no secret that in the past the Fed chairman, a free market thinker, has questioned the two's federally protected role in the mortgage market.