Alan Greenspan Renews Attack on GSEs, Freddie Mac and Fannie Mae

Greenspan Renews Attack on Freddie Mac, Fannie Mae

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Federal Reserve Chairman Alan Greenspan has spoken out again in favor of limits on the multi-million dollar portfolio holdings of the two biggest players in the mortgage game, Freddie Mac and Fannie Mae.

In remarks prepared for delivery via satellite to a housing conference in Atlanta, the Chairman restated his belief that Congress should put stringent limits on the two Government Sponsored Enterprises (GSEs) which together hold mortgages and mortgage backed securities valued at about $1.5 trillion. Their combined holdings 15 years ago were $132 billion. Greenspan stated that these holdings were far above that needed to allow the two corporations to fulfill their respective housing missions.

Greenspan has, over the last few months, repeatedly called for portfolio restrictions. He seems particularly troubled by what he views is a public perception that Freddie and Fannie are government insured entities. This, he has stated, not only promotes risk-taking on the part of some investors, but also gives the corporations a competitive advantage when it comes to mortgage rates. The two were created by Congress as vehicles to pump money into the housing market but are both publicly traded stock companies. If Congress fails to rein in the size of the portfolios, he said Thursday, it might risk “solidifying investors’ perceptions that the GSE’s are instruments of the government.” This competitive advantage over other financial companies is leading to a dangerous concentration of power in the two, he said.

Chairman Greenspan said that the Federal Reserve sees little evidence that the availability of fixed rate mortgages is tied to the portfolios and that it is doubtful that the two companies’ portfolios can influence home ownership, contribute to mortgage liquidity or to the advancement of capital markets. Homeownership, he said, seems to be increasing because of the growing incomes of households and generally low borrowing costs.

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It's the plethora of loan products available for home borrowers, NOT Freddie or Fannie, who helps home ownership. Freddie doesn't act on the Mortgage Fraud reported to it although they have a so-called Exclusionary List of the Mortgage Fraud players. Fannie doesn't even track Mortgage Fraud or know what to do when Mortgage Fraud is reported to it.

Above Posted By: Jack Olson | Tue, 8 Aug 2006 15:54:08 EST

Why limit a company that the government originally used to spur the economy. The government needs to get their hands out of business. Laws are quick to write and slow to undue. Things like this will work themselves out on there own. More than likely it will come from a grass-root initiative vs. a government directive.

Above Posted By: Zumi | Tue, 24 May 2005 18:50:05 EST

We should limit the GSEs since they have been involved in predatory lending and fraud.

Above Posted By: N Lavalle | Sun, 22 May 2005 09:49:04 EST

Greenspan Renews Attack on Freddie Mac, Fannie Mae

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