New Regulator in Rescue Plan Spurs Debate

New York Times (07/21/08) P. A1; Labaton, Stephen
The rescue plan for Fannie Mae and Freddie Mac proposed by U.S. Treasury Secretary Henry Paulson Jr. calls for a new oversight body for the government-sponsored enterprises (GSEs), which would be called the Federal Housing Finance Agency and would take away some of Congress' power over the GSEs. Under legislation currently up for consideration, the new regulator would have control over the GSEs' capital standards; but there are concerns that a time-consuming process to phase in new capital standards, coupled with the GSEs' strong lobbying efforts, could make changes difficult to implement. Additionally, critics of the proposal insist the new regulator would not have as much power as banking regulators. Meanwhile, the Senate version of the bill would make the change effective immediately; but Bush Administration officials contend that establishing a new watchdog would take months, and observers point out that the administration likely does not want changes made now that it is depending on the GSEs to keep the housing market afloat.