The House Financial Services Committee has voted 65-5 to approve a bill that establishes a strong, independent regulator to oversee Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.Committee Chairman Michael Oxley succeeded in getting a bipartisan vote by raising the conforming loan limit in high-cost metropolitan markets and by requiring Fannie and Freddie to contribute 5% of their after-tax profits to a new affordable housing fund. The new regulator has the power to increase Fannie's and Freddie's minimum capital requirements or place a financially troubled government-sponsored enterprise in receivership, if necessary. However, the bill falls short of providing the new GSE regulator with explicit authority to reduce the size of Fannie's and Freddie's giant mortgage portfolios, as requested by the Bush administration. This omission prompted several Republican members to vote against the bill. The regulator can order a GSE to reduce the size of its portfolio for safety-and-soundness reasons, and Rep. Barney Frank, D-Mass., argued that this language does not tie the regulator's hands until there is a crisis. "The fact is, this is a very powerful regulator," Rep. Frank said. "He has powers specifically to adjust the portfolios and also to raise capital."

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