Greenspan Wants to Limit Fannie Mae and Freddie Mac

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Fannie Mae and Freddie Mac stock prices went down after Federal Reserve chairman Alan Greenspan said the companies’ mortgage portfolio growth should be limited.

The two companies’ portfolios combined total to $1.5 trillion. Greenspan believes that this will lead to “almost inevitable” problems for the U.S. financial system.

“We have found no reasonable basis for that portfolio above very minimal needs and what I would suggest is that for liquidity purposes they’re able to hold U.S. Treasury bills in whatever quantity they would choose … and a $100 billion, $200 billion, whatever the number might turn out to be, limit on the size of the aggregate portfolios of those institutions,” said Greenspan.

“Greenspan has in the past expressed concern about the growth of the companies’ mortgage holdings, saying they could pose a risk if allowed to increase unchecked. The Fed chairman went farther on Thursday, telling members of the U.S. House of Representatives Financial Services Committee they should require the companies to slash their mortgage holdings.

Congress is weighing tighter supervision of the mortgage finance companies after accounting controversies and senior management ousters at both firms in 2003 and 2004.”

Fannie Mae’s share price fell 2.3% to $60.61, which is the lowest it has been since August 2003. Freddie Mac’s share price went down 3% to $63.90.

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Greenspan Wants to Limit Fannie Mae and Freddie Mac
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