Freddie Mac, Fannie Mae Hearings Cancelled

Calling the hearings premature, Fannie Mae officials declined to testify before a house committee looking into alleged mismanagement at the nation’s top two mortgage guarantee enterprises.

Rep. Richard Baker (R-LA), sponsor of one of two bills pending in Congress that would reconfigure the oversight of the two bodies, issued a statement Thursday calling off the hearings because of a “lack of cooperation” from the two companies, which between them, own or guarantee 42 percent of the $7 trillion in U.S. mortgage business.

"Their lack of cooperation is unfortunate and raises questions about their seriousness," Baker said in a statement. His bill seeks stricter, better-funded regulation of the two government-sponsored entities.

Janice Daue, spokesperson for Fannie Mae, said the company had "respectfully declined" to testify by saying it was premature to attend such hearings when the Bush administration is planning to introduce reforms that could affect the outcome. She said that Baker’s office was “understanding” of her company’s hesitancy to testify at this time.

Freddie Mac’s spokesman Dave Palombi told Reuters that his company had planned to testify, stating, "The testimony had been drafted."

In his statement, Baker insinuated that he would rely on subpoenas to get the testimony if it comes to that. "They cannot put off the subcommittee's questions indefinitely, however, and we will revisit this discussion at a later date, when I may have no choice but to consider extending a different form of invitation to receive their testimony," Baker said.

An accounting scandal at Freddie Mac came to light last month, forcing the ouster of the company’s top three executives. The company later admitted to tampering with its accounting to show positive earnings growth and was forced to restate its results. The two companies are shareholder owned and chartered by Congress.

Rep. Ed Royce (R-CA) introduced a new bill last week that would create a new regulator to watch over the two companies as well as the Federal Home Loan Banks. Royce, a member of the House Financial Services panel, introduced his bill a month after Baker proposed doing away with the current regulator as well as the Office of Federal Housing Enterprise Oversight. Baker’s bill calls for a new office. Both bills would move the regulator from the U.S. Department of Housing and Urban Development to the U.S. Department of the Treasury.

Baker’s bill faces serious opposition from fellow lawmakers, many of whom count the two firms among their campaign contributors. Both Fannie Mae and Freddie Mac have strong political ties and lobbying arms. Royce’s bill could take the teeth out of Baker’s bill or derail it all together.

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