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White House opposes creating oversight agency for housing enterprises

Senate Banking Committee Chairman Richard Shelby, R-Ala., was not taken aback by the news that the Bush administration now opposes his legislation creating a new regulator for the housing government-sponsored enterprises, in light of a controversial amendment adopted at the committee markup last week.

"It's not surprising for him at all," the spokesman said, noting that Shelby had raised "grave concerns" about the amendment to the bill's receivership provision but supported it during last week's markup in the interest of moving the bill forward.

"The future of the legislation is uncertain, but he'll continue to work to pass the bill based upon the principles outlined in his original proposal," Shelby's spokesman said.

Treasury Secretary John Snow and Housing and Urban Development Secretary Alphonso Jackson issued a joint statement Friday saying that the administration opposes the bill in its current form.

Shelby's bill would eliminate the Federal Housing Finance Board and HUD's Office of Federal Housing Enterprise Oversight, while creating a new, independent agency to oversee Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The bill also would authorize the agency's director to place any of those GSEs in either a conservatorship or receivership in the event of a financial crisis.

Current law allows the Federal Housing Finance Board to place the Federal Home Loan Banks in receivership, but OFHEO, which oversees Fannie Mae and Freddie Mac, only has conservator powers. The receivership amendment, sponsored by Financial Institutions Subcommittee Chairman Robert Bennett, R-Utah, would give Congress 30 days to intervene in any attempt by the new regulator to place a GSE into receivership. Bennett said his amendment would prevent regulators from moving too aggressively to appoint a receiver to a troubled GSE.

Snow and Jackson said Shelby's bill, as introduced, would have been a "substantial step forward" in strengthening the oversight of the GSEs. "However, an amendment adopted by the committee ... would significantly weaken one of the core powers needed for a strong regulator," Snow and Jackson said. "The amendment could reinforce a false impression that the American taxpayer provides an implicit guarantee to these entities."

Shelby, like the administration, opposes the amendment and hopes to remove it as the bill moves through the Senate, according to Shelby's spokesman. Shelby also plans to hold further hearings on the receivership issue.

"It's a delicate balance, and it's more clear than ever that it's going to be very difficult to attract a consensus," Shelby's spokesman said.