Bush Budget Seeks GSE Shrinkage

In its new budget proposal, the Bush White House is sticking to its guns in regard to shrinking the size of Fannie Mae and Freddie Mac.The White House says it favors a new, strong regulator for the housing government-sponsored enterprises, one that would require the two "over time" to "dispose of certain assets." The only assets the Bush administration wants Fannie and Freddie to hold are "those that provide a specific public benefit such as a pipeline for mortgage securitization and affordable housing mortgages not suitable for securitization." The 2007 budget released by the White House Feb. 6 offers no specific limits on the size of their portfolios, which together total $1.4 trillion. In the budget, the White House reiterates its concern that the two GSEs pose a "systemic risk" to the nation's financial system if something should go financially awry at the companies. Fannie Mae, Freddie Mac, and their backers oppose portfolio limits.