House Passes GSE Bill

The House approved the GSE regulatory reform bill by a 331-90 vote Wednesday after soundly rejecting tighter restrictions on Fannie Mae's and Freddie Mac's investment portfolios and an amendment to stop an increase in the conforming loan limit.An amendment by Rep. Ed Royce, R-Calif., to strengthen the new GSE regulator's hand in addressing systemic risk (by limiting or reducing the size of Fannie's and Freddie's investment portfolios) was rejected by a 346-73 vote. Rep. Royce argued that Congress should heed the warnings of Federal Reserve Board Chairman Alan Greenspan about systemic risk caused by the concentration of assets and debt in the two government-sponsored enterprises. The bill's supporters countered that the new GSE regulator has the necessary authority to prevent systemic risk. But Rep. Royce said the Bush administration disagrees with that assertion. The House voted 358-57 to reject an amendment by Rep. Scott Garrett, R-N.J., to block an increase in the Fannie/Freddie loan limit. The GSE bill (H.R. 1461) raises the loan limit so Fannie and Freddie can purchase jumbo loans of up to $540,000 in high-cost areas. The GSE loan limit is currently $359,650 nationwide.