An Obligation To Strengthen Oversight.(Excerpt)

Mr. Martinez, secretary of the Department of Housing and Urban Development, recently testified before a congressional panel considering changes to the oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

This viewpoint is an excerpt of his testimony.

Iwelcome the opportunity to join secretary (John) Snow in describing for the committee the administration's views on improving and reforming regulatory oversight of the housing government-sponsored enterprises. Secretary Snow has outlined the principles and priorities the administration supports. He and I are in full agreement. Congress and the administration have an opportunity and an obligation to strengthen the regulatory structure of the GSEs. A strong regulator is in everyone's best interests - the administration, Congress, Wall Street, investors worldwide, and most importantly, the American taxpayer.

The administration has a dual goal. We must ensure that, through the GSEs, financing is available for low- and moderate-income families. And we must ensure that the GSEs are subject to rigorous oversight, so that they are serving their public purpose.

The Office of Federal Housing Enterprise Oversight was established following the thrift crisis as an independent safety and soundness regulator, within HUD, for Fannie Mae and Freddie Mac. There is a misconception that HUD controls and has direct authority over OFHEO in the exercise of its safety and soundness duties. HUD does not. By statute, Congress has mandated that OFHEO's safety and soundness determinations must be made independently of HUD.

To ensure that the GSEs have appropriate financial oversight and are held accountable to their public mission, the administration supports strengthening the powers of the GSEs' regulator. Doing so would make the regulator more comparable to the stature, powers, authority, and resources of other financial regulators charged with safety and soundness oversight. Such a concept has worked well for financial regulators in other instances, including the Office of the Comptroller of the Currency and the Office of Thrift Supervision.

Currently, safety and soundness regulation is divided, with new program approval authority at HUD and financial oversight at OFHEO. It is the position of the administration that both elements of ...