Shelby: GSE Bill Must Grant Portfolio Authority

Senate Banking Committee Chairman Richard Shelby, R-Ala., says he cannot support a GSE bill unless the regulator has the authority to reduce the size of Fannie Mae's and Freddie Mac's mortgage portfolios and to focus their secondary-market activities on securitizations.In an article Sen. Shelby penned for a Capitol Hill newspaper, the chairman said the committee is taking a close look at the "investment portfolios" of the two government-sponsored enterprises and the risks they pose to the financial system. Fannie's and Freddie's portfolios have combined assets of $1.5 trillion. "The new GSE regulator should have the authority to address concerns with the size and content of the GSEs' portfolio holdings," he says in The Hill newspaper. And the regulator should have clear guidance to direct the GSEs to keep assets off their books if they can be securitized. "I will not support a bill that inadequately addresses the issues I have outlined," Sen. Shelby says in the article, entitled "Reduce portfolios to help the GSEs be safe and sound." The chairman's hard-line stance will make it difficult to craft a GSE regulatory reform bill that attracts Democratic support. But it looks like he will push ahead and force the committee to vote on a GSE bill before the August recess, one source said.