The Office of Federal Housing Enterprise Oversight is continuing to press Freddie Mac to limit the growth of its $723.8 billion portfolio, but director James Lockhart says he is negotiating from a "relatively weak" position because of his agency's limited powers.Freddie cannot produce audited accounts and still has risk management and internal controls problems, the OFHEO director told reporters June 15 after testifying before the Senate Banking Committee. "To be growing a portfolio is a questionable practice from a safety-and-soundness standpoint," Mr. Lockhart said. Mr. Lockhart told the committee that a House-passed GSE regulatory reform bill and the GSE bill pending in the Senate would strengthen OFHEO's powers to supervise Fannie and Freddie. However, the Senate bill provides "better guidance" on regulating the size of the GSE portfolios, and that would be "helpful," Mr. Lockhart said. OFHEO sent its 2005 annual report to Congress on June 15, highlighting the fact that Freddie increased the size of its portfolio by 9% last year. "Despite having accounting, control and systems problems similar to Fannie Mae, Freddie Mac grew its retained portfolio in 2005 and at a more rapid pace than the previous year," the OFHEO report says. OFHEO imposed a cap on Fannie Mae's $730 billion portfolio as part of a May 23 consent agreement.

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