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very much.

been very good. And what that says to me is giving more people a chance has been good business.

The CHAIRMAN. The gentlelady's time has expired.
Ms. CARSON. I think you have done a good job.
Thank you very much, Mr. Chairman.

The CHAIRMAN. Let me thank all of you, particularly our traveling folks from San Francisco and Cincinnati. We worked you pretty hard today, but I think the committee learned an awful lot. And that is obviously the purpose of these hearings. We thank you

And the second panel is dismissed. And the third panel, the lucky third panel can now come forward.

Produce our third panel, beginning with Mr. D. Russell Taylor, President and CEO of Rahway Savings Association on behalf of America's Community Bankers. Mr. C. Kent Conine, Conine Residential Group, Inc., on behalf of the National Association of Home

Builders. Mr. Allen Fishbein, Director of Housing and Credit Policy, Consumer Federation of America. Ms. Terri Montague, President and Chief Operating Officer of the Enterprise Foundation. Dr. William E. Spriggs, Executive Director of the National Urban League, Institute for Opportunity and Equality. And Mr. John Courson, President and CEO of Pacific Mortgage Company on behalf of the Mortgage Bankers Association of America.

And our last witness of the day, if you can't go to hell, be the last witness on the third panel, the gentleman from Texas, our former colleague, the Honorable Steve Bartlett, President and CEO of the Financial Services Roundtable.

Mr. FRANK. Mr. Chairman, that is what he gets for letting his seniority lapse. If he hadn't done that, he would have been way up there.

[Laughter.]

The CHAIRMAN. We thank all of you for your patience in waiting through this weighty subject and two panels before you. Again, it could be worse. It could be a Friday afternoon.

So with that, Mr. Taylor, let me recognize you for your testimony. STATEMENT OF D. RUSSELL TAYLOR, PRESIDENT AND CEO,

RAHWAY SAVINGS INSTITUTION, REPRESENTING AMERICA'S COMMUNITY BANKERS

Mr. TAYLOR. Absolutely. Thank you, Chairman Oxley, and thank you, Ranking Member Frank and members of the committee.

I am Russ Taylor. I am the President and CEO of the Rahway Savings Institution, a small mutual institution located in central New Jersey. I am also this year's chairman of America's Community Bankers.

Many of our members are specialists in mortgage lending and actively involved in the secondary market. Therefore, we appreciate this opportunity to provide our comments to the committee on GSE regulatory reform.

ACB has an intense interest for several reasons. First, we strongly support the secondary market role of Fannie Mae and Freddie Mac and the important housing mission they fulfill.

Second, we strongly support efforts to improve regulation to better ensure safety and soundness and focus on mission.

And three, our members are business partners with Fannie Mae and Freddie Mac and investors in their securities.

In fact, my own institution has active relationships with all of these entities.

ACB commends Chairman Baker and Representative Royce in their efforts. Their years of background work will make it easier for Congress to craft sound legislation.

We strongly support many of the provisions of their bills that provide substantial independence for the new agency.

My written testimony details the key elements of independence that are currently provided to other financial regulators. This to us is an essential element of GSE regulatory reform.

The new agency must also be able to fund itself without going through the annual appropriation process. ACB strongly endorses the Administration's position that the new agency have the authority to review both current and future programs of Fannie Mae and Freddie Mac.

For over a decade, HUD has not exercised its current program approval authority, and as a result Fannie Mae and Freddie Mac have engaged in, or at least attempted to engage in, activities inconsistent with their secondary market responsibilities.

The Administration, and pending bills, make it clear that HUD will still set affordable housing goals for Fannie Mae and Freddie Mac. HUD would actually gain authority to set goals and to enforce them. That, plus a new independent agency with a mandate to enforce the company's housing mission, should maintain their support for housing.

ACB strongly agrees with the Administration position that there should be no limit on the new agency's ability to increase capital requirements for Fannie Mae and Freddie Mac if necessary.

Let me be clear that we are not proposing the capital requirements be increased. But capital is the foundation for the safety and soundness of our financial system and must remain a flexible tool available to the regulator.

We recognize that any solution that Congress develops for Fannie Mae and Freddie Mac may have a direct impact on the Federal Home Loan Bank System. That is a system that we deeply care about. In fact, Secretary Snow testified that the Federal Home Loan Banks should also be regulated by the new agency.

ACB has traditionally supported separation between the regulation of Fannie Mae and Freddie Mac and that of the bank system. The Federal Home Loan Banks are cooperatives, not public companies, and pose different regulatory issues.

However, our members who do support a merged agency are concerned that Fannie Mae and Freddie Mac will enjoy a cost-to-funds advantage of the bank system is not included.

They also know that Federal Home Loan Banks, Fannie Mae and Freddie Mac, are all engaged in extensive interest rate risk management. A combined agency would, in their view, be better able to supervise these risks. ACB's board is weighing these arguments as we speak today.

I wish to again express ACB's appreciation for your invitation to testify on these important issues. We strongly support the committee's effort to strengthen the regulation of Freddie Mac, Fannie Mae and the Federal Home Loan Banks and look forward to working with you as you craft legislation to accomplish that goal.

Thank you.

[The prepared statement of D. Russell Taylor can be found on page 240 in the appendix.]

The CHAIRMAN. Thank you, Mr. Taylor.
Mr. Conine?

STATEMENT OF KENT CONINE, CONINE RESIDENTIAL GROUP, REPRESENTING NATIONAL ASSOCIATION OF HOMEBUILDERS

Mr. CONINE. Thank you, Chairman Oxley and members of the committee. My name is Kent Conine and I am President of the National Association of Home Builders, representing 211,000 members of our association, which employ over 8 million employees. Also President of Conine Residential Group, which is based in Dallas, Texas, specializing in both single-family and multi-family development and building.

I am pleased to comment on the recent proposals to restructure the regulatory framework for the housing-related GSEs.

On September the 10th, Treasury Secretary Snow and HUD Secretary Martinez unveiled before this committee the Administration's proposal to restructure the regulatory framework for the government-sponsored enterprises.

This pronouncement focused almost exclusively on improving the safety and soundness of the regulation of Fannie Mae and Freddie Mac.

While the nation's home builders support most of what has been put forth by the Administration to ensure a strong and credible regulatory framework, we have grave concerns about a shift from the narrow regulatory focus to a larger referendum on the housing finance system in general.

Housing mission and the GSE's role were largely omitted from the discussion during the September 10th hearing. We are pleased that this committee, by virtue of conducting today's hearing, recognizes that some of the concepts outlines by the Administration deserve more rigorous review and discussion.

Specifically, the Administration's proposal to remove the mission oversight or new program approval from HUD and place it in Treasury marks a fundamental shift in perspective about the role of HUD as well as how the GSEs engage in their day-to-day business and undertake new programs.

We strongly oppose such a change and urge you to retain HUD's oversight of new programs as well as the annual affordable housing goals and enforcement of our nation's Fair Housing Act.

In focusing on the safety and soundness regulation, we urge the committee not to lose sight of the core missions, which is consistent with the congressional intent creating the housing GSEs; that is to provide liquidity, capital and stability to the housing market.

Program oversight is key to this core mission.

The Administration's proposal blurs the mission of Fannie and Freddie, and thereby rationalizes its proposal by treating new program authority as an exclusive function of safety and soundness.

This has never been the case and fundamentally ignores the legislative history in the 1990 Treasury studies creating the 1992 GSE Act.

The objective and focus of program oversight is not safety and soundness, as HUD Secretary Martinez testified, it is mission compliance. An example would be furthering the Administration's goal of increasing minority home ownership.

Applying safety and soundness criteria in conjunction with Treasury's longstanding bias against programs that facilitate the flow of capital to housing would severely retard the development of new programs continuously needed by Fannie Mae and Freddie Mac to fulfill their housing mission and to adjust to market conditions.

It will stifle innovation necessary to provide liquidity to the housing credit markets, particularly in areas that otherwise would not be adequately served.

Such activities by definition involve higher risk and would be greatly constrained if program approval is solely a component of safety and soundness regulation.

For example, the highly successful Mortgage Revenue Bond program is being held hostage today by Treasury because they have failed to adjust the home purchase price limits since 1993.

On the issue of capital requirements, NAHB agrees with Secretary Snow that there is a need for stability in capital standards and that capital standards should not be subject to frequent change. NAHB applauds Secretary Snow's decisions not to recommend any changes in the GSE's risk-based capital regulation at this time, given that the standard took 10 years to develop and has been in effect for only about a year.

We are pleased that Treasury has given risk-based capital standard a chance to work.

Due to the low-risk nature of home mortgages, NAHB recommends against any changes in the GSEs minimum capital standard requirement as well.

Finally, the Administration is proposing to strengthen HUD housing goals authority over Fannie Mae and Freddie Mac. NAHB has a longstanding history of supporting housing goals. We supported the increases in the goals implemented by HUD's 2000 rule.

This rule also provided for bonus points for the 2001 to 2003 period for units financed for GSE mortgage-backed purchases in small, 50 to 50 unit multi-family properties and for units in two to four unit owner-occupied units.

NAHB feels that more needs to be done to encourage the GSEs to increase their activities in some market segments, such as rural areas and multi-family production.

At the same time, NAHB believes that any proposed changes to the housing goals should undergo careful examination. Fannie Mae and Freddie Mac were created to serve a broad range of housing needs, and we would not want to overly stringent the goals to impede that particular mission.

Continual increases in the percentages targets will also have diminishing returns and run the risk of adversely impacting other housing programs like our FHA single family program.

In conclusion, I appreciate the opportunity today to express our position on restructuring the regulatory oversight on the housing GSEs, particularly our opposition on moving the mission oversight from HUD.

I hope to work with you in the coming days to have a chance to work with you to craft a bill that will accomplish this mission.

Thank you.

[The prepared statement of C. Kent Conine can be found on page 127 in the appendix.]

The CHAIRMAN. Thank you, Mr. Conine.
Mr. Fishbein?

STATEMENT OF ALLEN FISHBEIN, DIRECTOR, HOUSING AND

CREDIT POLICY, CONSUMER FEDERATION OF AMERICA Mr. FISHBEIN. Thank you, Mr. Chairman, and Mr. Frank and members of the committee.

My name is Allen Fishbein and I am the Director of Housing and Credit Policy for the Consumer Federation of America.

CFA is a nonprofit association of some 300 consumer organizations with a combined membership of 50 million that was founded in 1968 to advance consumer interests.

CFA and many of its members have a longstanding interest and involvement in housing finance matters, including advocating for expanding the role of the GSEs in serving important housing needs.

My own background, which I want to mention, is that I served a tour at HUD as Senior Adviser for GSE Oversight. My duties included helping to supervise the setting of the present affordable housing goals for Fannie Mae and Freddie Mac.

We thank you for affording us this opportunity. CFA believes that the GSEs play an important, indeed essential role in promoting a sound housing market and by providing expanded home ownership and other housing opportunities. Through their statutory mandates, the GSEs are required to serve a dedicated percentage of their business to address the needs of low-and moderate-income households and underserved communities.

Changes to the GSEs regulatory structure, therefore, must be undertaken with great care and precision, so as not to work at cross-purposes with the GSEs ability to carry out these important mission activities.

In short, the charge should be do no harm to the GSEs' housing mission.

To summarize the key points from my written testimony, number one, we believe that it is in everyone's best interest to have a strong oversight regulatory structure. The tremendous growth in the size of the GSEs over the past decade has raised the stakes for regulatory oversight. Certainly, consumers, whether they are existing or future home buyers, renters or investors, along with other stakeholders have a strong interest in effective oversight of the enterprises.

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