The House of Representatives voted 331 to 90 on Wednesday to revamp the oversight of Freddie Mac, Fannie Mae, and the Federal Home Loan Bank.

The legislation enables the creation of a new independent regulator with the authority to set capital standards, dismantle a company in financial trouble, and require that the mortgage companies reduce their huge mortgage portfolios. The bill, however, fell far short of actually demanding the reduction of those portfolios as has been advocated by many including retiring Federal Reserve Chairman Alan Greenspan. The combined portfolios of Freddie Mac and Fannie Mae have been estimated to total $1.5 billion.

A somewhat similar bill to regulate the two Government Sponsored Enterprises (GSEs) has been stalled in the Senate for some time. It differs in several respects from the House version of the regulatory bill and experts say that there will be difficulties in reconciling the two in order to reach a consensus that could be approved by both branches. The Bush Administration is also said to be unhappy with the House bill. The main bone of contention between opposing factions in the Senate and the source of the Administration's opposition is the lack of that requirement to shrink the portfolios.

Fannie and Freddie's supporters were able to beat back a couple of inhospitable provisions in the House version. One of these would have eliminated the GSE's ability to borrow money from the U.S. Treasury and another would have given more authority to the proposed regulator. Under the House versions of the legislation the two corporations will also be able to buy so called "jumbo loans" from originators. Under current rules the GSEs are allowed to buy only conforming loans, defined as mortgages of up to $359,000 this year, rising to $400,000 next year. The House version of the bill would allow the GSEs to purchase loans of up to $600,000.

Another difference between the House and Senate versions is the provision in the House of Representative's legislation mandating creation of an affordable housing fund. This would require the GSEs to set aside 3.5 to 5 percent of the corporations' profits for the next five years to build low-income housing. One mechanism would be housing grants to local entities. A last-minute amendment, however, would prohibit the use of these funds by any group that engages in get-out-the-vote activities. This insertion was urged by conservative organizations and opposed by many non-profit groups as well as faith-based organizations such as the National Urban League and Catholic Services.

The Senate version of the GSE oversight bill was approved by the Senate Banking Committee last summer but is not expected to be brought to the floor until the middle of next year.

All of this activity, of course, has emerged from the nearly two-year old series of disclosures about first Freddie and then Fannie's accounting irregularities. Freddie fessed up quickly and has partially recovered (although obviously still facing Congressional backlash); Fannie has been forced to request delay after delay in reporting restated earnings, reported in the vicinity of $9 billion, dating back to 2001, early 2005 slashed its quarterly divided in half in anticipation of the revised profit figures.