Last Tuesday, Rep. Richard Baker (R-La.) introduced legislation creating a new regulator for the GSEs and the Federal Home Loan Banks. The bill - The Federal Housing Finance Reform Act of 2005 - abolishes GSE regulator Office of Federal Housing Enterprise Oversight and FHLB regulator Federal Housing Finance Board and establishes a new independent regulator called the Federal Housing Finance Authority.

A House press release stated that the new regulator would issue and enforce management and operations standards including credit, interest rate and market risks, internal controls, liquidity and investments. Additionally, it would have discretion to adjust minimum and risk based capital levels. The bill would also give the regulator the authority to approve new programs, set the conforming loan limits, and establish housing goals and annual home purchase goals for Fannie Mae and Freddie Mac. The legislation also gives the regulator the ability to put the GSEs in receivership if either one becomes critically undercapitalized.

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