Greenspan backs cut in Fannie Mae, Freddie Mac portfolios

September 18, 2005|By BLOOMBERG NEWS

Federal Reserve Chairman Alan Greenspan said the combined $1.47 trillion portfolios of Fannie Mae and Freddie Mac should be reduced and that moving too slowly to do so may disrupt the U.S. financial system.

"Excessive caution in reducing their portfolios could prove to be destabilizing to our financial system as a whole and in the end could seriously diminish the availability of home mortgage funds," Greenspan wrote in a Sept. 2 letter to Sen. Robert F. Bennett, a Utah Republican, released last week.

Greenspan said reducing the portfolios of mortgage-backed securities wouldn't disrupt the bond market.

Congress will probably vote this week on a bill to strengthen oversight of the two mortgage finance companies, said Rep. Michael G. Oxley, an Ohio Republican and chairman of the House Financial Services Committee.

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