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These companies are important to our economy and to St. Louis. Fannie Mae has been an active participant in our downtown renaissance. This is inclusive of innovative product and program offerings like the Downtown Employer Assisted Housing program that is administered by the Downtown St. Louis Partnership. Additionally, in February of this year, Saint Louis University held a press conference to introduce Hometown SLU, the University's new Employer Assisted Housing Initiative which includes a financial incentive for employees purchasing a home near the University campuses as well as a technology platform, the Home Buyer's Assistance Site, that is available to all University employees regardless of where they purchase a home.


Congress should act quickly, yet with care, so as to avoid harmful unintended consequences. Uncertainty about this issue creates negative volatility in the market. The legislation must recognize the importance of stability in the capital standards required of the GSEs. Fannie Mae's and Freddie Mac's capital structure does not need to be changed, as the Administration has made clear. Increasing the capital standards for the GSEs now could result in an increase in the cost of homeownership.

Fannie Mae and Freddie Mac have met their housing goals every year. It is critical that housing goals are not increased to the point that they threaten the safety and soundness and undermine the ability of the GSEs to serve a market that includes middle-class and low-income borrowers. Housing goals that segment their business could force the GSES to stop expanding homeownership opportunities and focus primarily on allocation of their business among various populations. Numerous goals would fragment the market and lead to credit allocation.

Mr. Chairman, Franklin Raines must be applauded for the great job that he has done in leading Fannie Mae in its execution of the mission assigned to it by the Congress. The GSEs, of which Fannie Mae is the largest, have become the world leaders in the secondary mortgage markets. They were mandated by Congress to create a secondary trading market to improve the functioning of home mortgage markets. They exceeded expectations and have done so well that in excess of 60% of the growth in the US economy the past couple of years is attributed to housing. Where would the country be without that contribution? Franklin Raines is indeed one of the country's modem day "profiles in courage”.

Mr. Chairman. I ask unanimous consent to submit my statement to the record.

Congressman Joseph Crowley
Committee on Financial Services

Opening Statement
September 25, 2003

I would like to begin by thanking Chairman Oxley and Ranking Member Frank for conducting this important hearing this morning


Our Housing Government Sponsored Enterprises have been a focal point of many hearings of this Committee over the past few years

What have we learned?

They are safe and sound financial institutions, as they have always met the tough 6 voluntary commitments mandated by this Committee

• They have contributed significantly to keeping this economy afloat over the past 3 years


They continually meet the housing goals as established by HUD

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They have done a phenomenal job at providing lower costs loans for homeowners throughout the United States

On that point, I cite a story from the Wall Street Journal that demonstrates in my home region of New York City that jumbo rates are much greater then conforming loan rates in large part because of the existence of the housing GSE's in the conforming market

I do have a concern that the housing GSE's be granted more flexibility in adjusting the definition of conforming loan limits for high cost areas, like New York City

I welcome the participation of all parties at this hearing today, especially the Chairman of Fannie Mae, Frank Raines who is a stable voice at Fannie, just as he was a stable voice at OMB when he was head there, a long time ago, when surpluses, prosperity and near zero unemployment were our nation's biggest economic concerns

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Additionally, I look forward to hearing from Freddie Mac. While the newspapers have been discussing their recent restatements, and I do not condone the accounting problems there, I would like to remind people that when they restated, they showed GREATER earnings, not less, like most of the corporate accounting scandals we have seen over the past 3 years


In my Congressional District alone, Freddie's $403.9 million in mortgage purchases financed homeownership for 3,413 families

• Additionally, I greatly look forward to hearing the comments of Panel 3, in discussing the

important mission of Freddie and Fannie

• Regardless of the fate of OFHEO, any reform legislation must mandate that the missions

of the housing GSE's remain, and I believe they are best kept at HUD, the Federal department dedicated to housing

• Additionally, we need to ensure the independence of the GSE's with respect to their

creativity in creating new products for market

• This Committee wrote Gramm-Leach-Bliley. It would be against our basic nature to now

restrict the ability of private companies to limit their dynamicism and creativity in bringing products to market - products which benefit our consumers

• Additionally, I am interested in hearing the testimony of OFHEO. They have been a

much-maligned agency; while they have had problems, let us remember that it was Congress that repeatedly refused to provide them the funding they needed to do their job

• I look back at the Hinchey Amendment to the FY 2001 VA-HUD bill; while Mr. Baker

did support this amendment to increase the oversight budget of HUD, most of his colleagues did not, and it failed on a near party line vote

• If OFHEO is essentially dissolved and its work brought to Treasury, I would want to

make sure that it is done in a way that will not upset our capital markets but also ensure that the creativity of the GSE's are preserved, the independence of OFHEO is kept and that the mission of the housing GSE's as well as their goals remain in place

• As we all know, housing has been a provider of jobs and benefits, incomes and tax

revenues during the past three years of recession, supporting the rest of the economy. We cannot dismantle this

• That is why I salute Treasury Secretary Snow's comments on not wanting to change the

capital standards of the housing GSE's

• While it is clear to me that Fannie Mae and Freddie Mac are financially strong and sound, I think the financial markets would benefit from Congressional action to sh

that we will ensure that the role played by the Housing GSE's is maintained, and that their charter and mission to engage in all communities on behalf of affordable housing remains a priority.

• I am prepared to work with you, Mr. Chairman and Mr. Frank, to develop legislation this

year to establish a strong safety and soundness regulator for the Housing GSE's at the Treasury Department if that is the will of this Committee

• Again, thank you, Mr. Chairman and Mr. Frank for holding this hearing today

September 25, 2003

Opening Statement by Congressman Paul E. Gillmor
House Financial Services Committee
Full Committee Hearing on Regulatory Oversight of the Government Sponsored

Thank you, Mr. Chairman, for holding this important hearing and for your continued leadership on this issue. I would like to take this opportunity to extend a special welcome to David H. Hehman, the President and CEO of the Federal Home Loan Bank of Cincinnati in the great State of Ohio, which provides a great service to many banks in my district, the Fifth Congressional District of Ohio.

I think we're all in agreement that the current system of regulatory oversight for our Government Sponsored Enterprises (GSEs) needs to be reformed. Today, I look forward to a full discussion of all the proposals before us with the benefit of Treasury Secretary John Snow and Housing and Urban Development (HUD) Secretary Mel Martinez' remarks from our last hearing on this issue.

Late last year, in the wake of the Enron scandal and subsequent revelations of widespread problems in the accounting industry, the Federal Home Loan Mortgage Company (Freddie Mac) announced that it would have to restate its earnings after it fired its former auditor, Arthur Anderson.

This reevaluation kept Freddie Mac from upholding their voluntary agreement to file with the Securities and Exchange Commission (SEC) as the Federal National Mortgage Association (Fannie Mae) did in April of 2003. Two months later the Office of Federal Housing Enterprise Oversight (OFHEO) released its annual report to Congress addressing the upcoming earnings restatement by Freddie Mac, while expressing satisfaction with the independence of their intemal and external audits and confidence in the actions of Freddie Mac's Board of Directors.

It concerns me greatly that the responsible federal regulator, OFHEO, was clearly unaware of these problems inside the management of Freddie Mac and was previously unaware of their need for an earnings restatement. OFHEO simply was not doing its job.

I am pleased to be an original cosponsor of Chairman Baker's legislation, the Secondary
Mortgage Market Enterprises Regulatory Improvement Act (H.R. 2575), moving Fannie
Mae and Freddie Mac under the supervision of the Treasury Department. I think it
very important that Treasury maintain full regulatory authority over Fannie Mae and
Freddie Mac to ensure their safety and soundness.

With regard to the mission of Fannie Mae and Freddie Mae, including approval of new programs and fulfillment of affordable housing goals, I feel both Secretary Snow and Martinez made clear that a consultation process could be established allowing the Treasury Department to benefit from HUD's knowledge in this area without giving up regulatory authority.

Thank you again, Mr. Chairman, for calling this important hearing and I look forward to an informative session.

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