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Committee on Financial Services

United States House of Representatives

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CURRENCY

The Committee on Banking and Financial Services
U.S House of Representatives, 105th Congress
James A. Leach, Chairman

Phone: (202) 226-0471 Fax: (202) 226-6052 Internet: http://www.house.gov/banking

For Immediate Release                                              
Thursday, July 24, 1997Andrew Biggs 226-0471


Opening Statement for Chairman Richard H. Baker
Subcommittee on Capital Markets, Securities, and
Government Sponsored Enterprises

Today we convene the Subcommittee to review a General Accounting Office (GAO) report entitled Advantages and Disadvantages of Creating a Single Housing GSE Regulator.

In it, GAO concluded that "an independent, arm's-length, stand-alone regulatory body headed by a board would best fit our criteria for an effective regulatory agency structure for the housing GSEs." A single independent regulator for all housing GSEs would be "more independent and objective than the separate regulatory bodies," the GAO said, and "better ensure consistency of regulation for GSEs that operate in similar markets." In addition, "coordination and sharing of expertise among staff responsible for safety and soundness and mission compliance should be facilitated by having all staff in one regulatory agency."

The study seems to confirm my view that consolidating regulation of all three housing GSEs -- FreddieMac, FannieMae, and the Federal Home Loan Bank System -- would greatly improve our current GSE oversight. With close to $1.7 trillion in implicit federal backing, amounting to almost 12% of all outstanding credit in the United States, the housing GSEs represent a considerable risk that warrants the most effective regulation.

In short, there are currently three regulators for the three housing GSEs. All three regulators have different roles and purposes. With a budget of $15 million and 78 staff, the Office of Federal Housing Enterprise Oversight (OFHEO) regulates the safety and soundness of FreddieMac and FannieMae. For the same two GSEs, the Department of Housing and Urban Development (HUD) spends about $2.5 million regulating mission compliance. And finally, the Federal Housing Finance Board (FHFB), with almost $18 million and 117 staff, regulates both the financial condition and the mission compliance of the Federal Home Loan Bank System.

I suspect, and I believe GAO will confirm, that consolidating the three regulators listed above into one agency will yield the most effective regulator.

I look forward to the testimony of the General Accounting Office and the regulators. Thank you to all the witnesses for testifying.

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