In its new budget, the Bush administration is holding firm on creating a new "world-class" regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System, noting that a financial crisis at these agencies "could have consequences throughout the economy."According to the White House, "six out of ten" banks hold as assets "GSE debt in excess of 50 percent of their equity capital." The Bush administration calls the housing GSEs "highly leveraged," saying that Fannie, Freddie, and the FHLBank system had combined balance sheet liabilities of $2.3 trillion at year-end 2002, a 519% increase over 10 years. The White House also says Fannie's and Freddie's current regulator, the Department of Housing and Urban Development, needs "new administrative authority" to enforce affordable housing goals at the companies. "Current law does not permit the Secretary to impose timely and appropriate penalties for a GSE's failure to meet a goal," the White House says. The budget document maintains that private-sector residential lenders contribute more to affordable housing than the GSEs.

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