A new GSE regulator proposed by Rep. Richard Baker, R-La., would have too much power to order a reduction in the size of Fannie Mae's and Freddie Mac's mortgage portfolios and limit their products and activities, according to Rep. Barney Frank, D-Mass.The ranking Democrat on the House Financial Services Committee said he wants to "toughen the criteria" by which the regulator could mandate "severe reductions" in portfolio assets or other activities. He told MortgageWire that the new regulator should have the authority to restrict the size of the portfolios for safety-and-soundness reasons -- "not because of an ideological view that they are too big." Speaking to a rural housing conference, Rep. Frank pointed out that Federal Reserve Board Chairman Alan Greenspan has expressed worries about the risks of Fannie's and Freddie's mortgage portfolios, while the risks presented by unregulated hedge funds with trillions of dollars of obligations "don't bother him." He also warned that there is going to be a fight over the product approval section of the Baker bill. "It is aimed at protecting competitors, and it goes far beyond what is needed for safety and soundness," he said.

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