U.S. House Approves Fannie Mae, Freddie Mac Oversight Bill

Bloomberg reports:

The U.S. House passed legislation that would create a stricter federal regulator for Fannie Mae and Freddie Mac in response to more than $15 billion of accounting errors at the government-chartered mortgage finance companies.

The legislation, passed in a 331-90 vote, would subject the companies to tougher capital standards and channel 3.5 percent of their profits to a fund for affordable housing. It would also give a regulator power to bar the companies from new businesses and put them under receivership in the event of default.

``It is time for a new GSE regulator who can prevent problems from developing and can take swift actions if the problems arise,'' Representative Michael Oxley, a Republican from Ohio and chairman of the financial services committee, told the House during the debate over the bill today.

Before the legislation becomes law, its Republican sponsors must close differences between House and Senate versions. The House bill, unlike a Treasury-backed version in the Senate, doesn't require a new regulator to cut the combined $1.45 trillion mortgage portfolios of Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac. The portfolios generate about 85 percent of their profits.

The Bush administration said today it opposes the House bill because it is too weak.

The noose is tightening around Fannie and Freddie.