The chief executives of Fannie Mae and Freddie Mac say limiting their growth by placing constraints on their portfolios and curbing their debt issuance would result in higher mortgage rates.In Senate testimony late Wednesday, Freddie Mac's new chairman and chief executive, Richard Syron, said there is "no way that mortgage debt and the risks of investing in it would disappear by downsizing the [government-sponsored enterprises] or making other changes to the GSE charter." Fannie Mae CEO Franklin Raines said, "Any arbitrary constraint on our portfolio would remove an important bid for mortgages from the market, which would lead to higher and more volatile mortgage rates for homeowners." The day before, Federal Reserve Board Chairman Alan Greenspan told the Senate Banking Committee that as a "goal" he favors privatizing Fannie and Freddie or limiting their growth by putting constraints on their debt issuance. The central banker said he thinks it's essential to the U.S. economy to eliminate as much as possible the two GSEs' federal subsidy and their ability to expand their on-balance-sheet assets.

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