The Bush administration will not compromise on its principles for establishing a strong regulator for Fannie Mae and Freddie Mac, Treasury Assistant Secretary Wayne Abernathy told a recent American Bar Association forum.The current regulator is not up to the job and does not have the tools or the resources to assure investors about the true condition of the two government-sponsored enterprises, he said in a hard-hitting speech. "I think that is why, whenever there is a new bit of bad news, there is significant impact in the marketplace," Mr. Abernathy said. "Because the markets are not comfortable that there is a cop on the beat who is not surprised by that piece of information." The Treasury and the GSEs are at loggerheads over the shape of a GSE regulator bill, and administration officials have been pushing their case hard lately. Mr. Abernathy stressed that the Treasury secretary will never agree to legislation that creates a totally independent GSE regulator under the Treasury Department. Without giving the Treasury secretary direct input on GSE policy matters, he said, Treasury would be "leasing" its name to the GSEs. "And that name is too important to tolerate that," Mr. Abernathy said. He also indicated that the Treasury could ensure that the new regulator does not become a "captive" of the two GSEs, whose "political clout" exceeds that of "any other institution in this town." The Senate Banking Committee has scheduled its second hearing on improving GSE regulation for Nov. 13.

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