The Senate Banking Committee has approved a GSE regulatory reform bill by an 11-9 party-line vote that would direct a new regulator to reduce the size of Fannie Mae's and Freddie Mac's mortgage portfolios.The combined portfolios currently contain $1.5 trillion in mortgage assets. Democrats argued that the bill would require the two government-sponsored enterprises to reduce their mortgage holdings by $600 billion to $760 billion, which they said would impair the GSEs' ability to support the housing market. Committee Chairman Richard Shelby, R-Ala., stressed that he believes the new GSE regulator needs "clear direction" to reduce the portfolios in order to refocus the GSEs on their housing mission and decrease the potential for systemic risk. Despite the divide, Democrats and Republicans said they still hope a consensus can be reached. Sen. Christopher Dodd, D-Conn., declared that everyone wants a GSE bill and said work should continue in order to resolve the differences. "We are close to finding common ground here," said Sen. Jon Corzine, D-N.J.

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