The Bush administration expects a new GSE regulator to reduce Fannie Mae's and Freddie Mac's mortgage portfolios to a level that provides enough liquidity for the mortgage market and furthers their housing mission.Treasury Secretary John Snow told the Senate Banking Committee Thursday that such guidance to the regulator of the government-sponsored enterprises would reduce the portfolios "way down." The secretary did not suggest a hard dollar cap on the portfolios, and he indicated that the GSEs would be able to divest their mortgage assets over time. (Fannie and Freddie have mortgage portfolios totaling $1.5 trillion.) Democratic senators continued to argue that the administration's proposals would cripple Fannie Mae and Freddie Mac and increase mortgage interest rates. It is becoming clear that the portfolio issue is dividing Republicans and Democrats on the committee, making it difficult to get a bipartisan bill that the administration can support.
