A Limit on the GSEs Portfolio Size Would be Good Start

Attempts by the White House to limit Freddie and Fannie's portfolio size was rejected by Congress last year. The two GSEs have had Congress in their pocket for years and neither the Repubs or Dems in Congress want any reform.

"WASHINGTON (Reuters) - The Bush administration on Monday said Congress should create a new regulator for Fannie Mae and Freddie Mac and direct it to cut the $1.4 trillion investment portfolios held by the mortgage finance giants.

In an analysis accompanying Bush's budget proposal, the White House reiterated its view that the portfolios of loans and securities held by the government-sponsored enterprises pose a risk to the broader financial system.

The administration said legislation to overhaul supervision of Fannie, Freddie and the Federal Home Loan Bank System should give a new regulator authority to assess not only safety and soundness concerns but also the "systemic risk" posed by the enterprises and their activities."

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