The "he-said she-said" debate over increasing government sponsored enterprise debt and potential risks to the economy has heated up once again. FM Watch, a lobbying group that monitors the GSEs, and Fannie Mae have traded statistics-laden reports to portray a threat that does or doesn't exist, depending upon who's talking.

Fannie Mae's vice president of corporate relations, David Jeffers, said that its report, which countered a report issued by FM Watch days earlier, was not so much a direct response to FM Watch's report but an opportunity to shed light on all constituencies concerned with Fannie Mae's growth. "We've certainly fired back at FM Watch; it didn't really feel like that as much this time," he said. "It was more like, this is in response to all their phony mumbo-jumbo, but it's also time to set the record straight."

Jeffers said that there have been legitimate questions raised about potential risk posed by the GSE's growth, but that FM Watch has disseminated "misinformation" that has been picked up by others either "intentionally or inadvertently."

"If GSEs continue to issue unlimited and unrestricted debt, the risk to the American taxpayer will be unlimited, open-ended and infinite," states the FM Watch report.

"Our debt is not an obligation of the U.S. taxpayer; we explicitly tell investors that our securities are not guaranteed by the government," said Sharon McHale, spokeswoman for Freddie Mac, who did not issue a formal response to FM Watch, but has been vigilantly watching their attacks. "And we are very well capitalized. So our debtholders are very well protected. It's simply wrong to suggest that the taxpayer is responsible for our debt because that simply is not the case."

"Separate, apart from FM Watch, you've got a serious regulator in the form of [the Office of Federal Housing Enterprise Oversight], for instance," Jeffers said. "You have the Treasury Department, who has raised legitimate questions." He said that the report was to display all of its information in one place.

"We are required by our regulators to withstand a 10-year depression, and in fact we have been managing to a risk-based capital rule similar to the one that OFHEO has been proposing internally for years," McHale added.

"If you boil Fannie Mae down to its fundamentals, we're asked through our charter to provide maximum benefit at minimum risk, and I think that document demonstrates how we carry out that job," he added.

McHale also pointed out that the reason GSE debt has been growing at such a quick pace is the robust economy and low mortgage rates, but noted that mortgage debt is growing slowly relative to the economy and other forms of debt.

A spokeswoman for FM Watch said that the group would "absolutely not" alter its strategy in future attacks against the GSEs.

Mike House, the executive director of FM Watch, is applauding the effort made by Fannie Mae, as it establishes a "much-needed debate about the serious threat GSE debt poses to American taxpayer." He added that, "FM Watch believes that the fact-based data and analysis that we have provided in our documents describing this debt deserves thorough discussion."

"Uncategorically, FM Watch is way off base to suggest we are risky or represent some kind of risk to the U.S. economy, because that is simply not the case," McHale said.

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