http://story.news.yahoo.com/news?tmpl=stor...al_gses_snow_dcSnow Warns Fannie, Freddie Pose Threat
Thu Apr 7,10:43 AM ET
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By Kristin Roberts
WASHINGTON (Reuters) - Mortgage giants Fannie Mae and Freddie Mac could threaten the economy if Congress fails to curb their investment activities, U.S. Treasury Secretary John Snow said on Thursday.
In a second day of hearings before the U.S. Senate Banking Committee on the hot political issue of how to rein in government-sponsored enterprises, Snow told Congress to limit the size of the companies' mortgage portfolios, saying they are not needed to fulfill the core mission of supporting housing.
What's more, their size and the interest rate risk they carry potentially threatens the financial system and the economy.
\"The risks undertaken by the GSEs, if not properly managed, may pose a threat to their solvency, the stability of the other financial institutions and the strength of our economy,\" Snow said in comments that often echoed Wednesday's testimony from Federal Reserve Chairman Alan Greenspan.
Snow said Congress should phase in limits on the companies' portfolio activities in order to protect the markets.
He also said the lines of credit the companies enjoy as part of their charter, and which he said markets falsely see as a sign that the government backs GSEs' debt, would only be used if a GSE were in \"significant financial distress.\"
\"Congress may wish to consider reforms in this area as well,\" Snow said in his prepared testimony.
The Bush administration has twice in recent years torpedoed legislation aimed at beefing up oversight of the extensive companies on the grounds that the measures lacked teeth.
Some lawmakers have already indicated that curtailing GSEs' mortgage portfolios may be disruptive to markets.
The apparent disagreement between some lawmakers and the White House may set the stage for a protracted struggle over precisely how to impose controls over the huge mortgage lenders that most agree in principle are needed.
Earlier this week, a key House Republican, who was widely expected to propose the toughest measures and stiffest regulation of the companies, left out provisions to impose strict limits on portfolio activities. His bill would give a new regulator power to order the companies to cut their portfolios, but not require it.
That countered advice from the Federal Reserve, which argued that limits were needed to reduce the risks the companies pose.
Snow also urged Congress not to overlook the advantages of placing a new regulator for the GSEs within the Treasury Department -- a tricky subject that policymakers continue to debate as they try to lessen the view on Wall Street that the companies are extensions of government.
Alphonso Jackson, secretary of the Housing and Urban Development Department, added his endorsement to that idea.
But, also in testimony before the Senate committee, Jackson said a core element of oversight should remain at his department to ensure that affordable housing objectives are met.
My \"limited understanding\" theory:
Oil is currently driving the inflation bubble...
As manufacturing fails to absorb the oil price increases and everything petro-based goes sky high (and commodity shipping costs get driven up), inflation starts driving up mortgage interest rates. With currently inflated housing prices coupled to double-digit interest rates, fewer people can afford to buy homes, driving prices down.
This forces many homeowners that are overextended into bankruptcy (where there is little relief anymore), and leaves the door wide open for the moneylenders to acquire even more cheap wealth...
Also, as inflation heats up, and discretionary income falls, wham, the faucet of new mortgages gets turned off, and we're back in recession, heading for banking catastrophes, and ultimately a depression that makes the 30's look like everyone won \"Who Wants To Be A Millionaire\"....
Z-[/b]
History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. ?
Thomas Jefferson
[font=Verdana,Arial,Helvetica]? ? ? ? ? 2005 Ernie Mardaga[/font] ?
?[font=verdana,arial,helvetica,sans-serif]AP-ES-04-07-05 1015EDT
This story can be found at: <a href=\'http://ap.tbo.com/ap/breaking/MGBFGGY197E.html\' target=\'_blank\'>http://ap.tbo.com/ap/breaking/MGBFGGY197E.html</a>[/font] ?
I'm somewhat familiar with technical analysis of stocks and commodities. In technical analysis terms, we would call this a "lowside breakout", and I think you're right.Just for the weekend. ?It's on the housing bubble, which appears to be cracking.
Cary[/b]