Snow Calls For GSE Portfolio Limits

The government-sponsored entities pose a potential risk to the financial markets and they need a regulator that has the authority to limit their entry into new products and see that their portfolios are not larger than necessary to make a secondary market, according to John Snow, the Secretary of the Treasury.Speaking at the Bond Market Association's annual meeting in New York, Mr. Snow noted that Fannie Mae and Freddie Mac trade paper as though they are affiliated with the U.S. government, even though they are not, and this is "not a healthy thing." Touching on the housing market, Mr. Snow said that it is seeing some moderation, signs of which include rising inventories. However, he sees this as a sign of "normal adjustment" after a period of attracting capital and high mortgage lending volumes. He doesn't expect this moderation in the housing market to impact the U.S. economy, which he sees as "extraordinary in its capacity to take blows and adapt."