The Bush administration still maintains that the Federal Home Loan Banks should be part of GSE reform legislation next year to create a "world-class" regulator for Fannie Mae and Freddie Mac.The mortgage activities of FHLBanks have "converged" with those of the other two housing government-sponsored enterprises, Treasury Under Secretary Brian Roseboro told an FHLBank forum in Washington. "The Federal Home Loan Banks are no longer simply a wholesale financing outlet for their members, but have moved directly into the mortgage investment business, which encompasses the same types of risks as Fannie Mae and Freddie Mac face," he said. The Treasury official declined to comment on an application by the Seattle FHLBank to create a mortgage-backed securities program, which is pending before the Federal Housing Finance Board. However, he indicated that the Treasury looks favorably on institutions that want to increase competition as well as the depth and breadth of the secondary market. "So as a general principle, these activities ... that increase competition are good," he told reporters. Finance Board Chairman Alicia Castaneda declined to comment on the Seattle MBS application.

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