Sen. Sununu Gets A+ for asking the right question

(Washington, D.C.) – Citizens Against Government Waste (CAGW) today applauded Federal Reserve Chairman Alan Greenspan for his pro-oversight remarks regarding the behemoth government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.  Greenspan, who was testifying before the Senate Banking Committee, was responding to a question from Sen. John Sununu, R-N.H., asking whether the Fed chairman supported Securities and Exchange Commission oversight of or involvement in Fannie and Freddie.  

“Despite being publicly traded corporations, Fannie and Freddie are currently exempt from many federal securities laws, including those requiring open books,” CAGW Vice President Leslie Paige said.  “In an age of Enron and Arthur Andersen, these two companies, which are linked to the federal government and benefit from the perception of taxpayer backing, should have to abide by the same rules as their competitors.”

Greenspan told the committee, “these are legally private corporations and should be handled the way private corporations are handled.”  Although Greenspan wouldn't comment on specific legislative or regulatory proposals, some observers took his comments as an endorsement of the Shays-Markey bill to improve GSE accountability.

Fannie and Freddie agreed in July to give up some of their federal perks and begin registering their common stock and filing financial disclosures with the SEC early this year.  They additionally agreed this month to enhance their mortgage-backed securities disclosures as recommended in a report released last week by the SEC, Treasury Department and Office of Federal Housing Enterprise Oversight.

However, Greenspan said the companies’ effect on mortgage rates is negligible enough that any change or increase in their oversight wouldn't significantly impact mortgage rates or the secondary markets.  The companies had vehemently fought increased SEC oversight saying it was a “tax on home ownership.”

Greenspan reiterated his stance that Wall Street's presumption that the federal government would bail out either company in a crisis “effectively enables them to sell mortgages at a number of basis points below what the market would otherwise be.”

But, Greenspan said, “as best we can judge, it is a very small number.  So I'm not at all convinced that many of the proposals really make all that much difference to the secondary mortgage market or to the level of mortgage interest rates to the American public.”

“Investors owe Chairman Greenspan and Sen. Sununu a debt of gratitude for advancing the cause of full financial disclosure,” Paige added.  “The status quo is not good enough: If they won’t do it on their own, Congress must force Fannie and Freddie to be more transparent and accountable.”

Citizens Against Government Waste is a nonpartisan, nonprofit organization dedicated to eliminating waste, fraud, mismanagement and abuse in government.