Richard F. Syron, chief executive of mortgage company Freddie Mac, said yesterday that his company and its larger rival, Fannie Mae, are no longer the "oligopoly" they once were and should not be overwhelmed with new federal regulations.
Syron, head of Freddie Mac since 2003, made his remarks at a shareholder meeting in McLean. His comments came as Congress considers legislation to tighten regulation of Fannie Mae and Freddie Mac after recent accounting scandals. The House Financial Services Committee passed a bill in May. The Senate Banking Committee is to take up a companion measure late this month.
Congress and the White House are still debating how strict the new regulations should be, with some members of the Senate and the Bush administration arguing that an outside regulator should have control over the size of the two companies and be able to limit the types of investments they make.
Syron said yesterday that recent accounting troubles have already made Freddie Mac more cautious, while the changing nature of the mortgage industry has cost both companies market share. The two companies buy mortgages from banks and other lenders to free up more money for home buyers but shy away from the adjustable-rate and interest-only arrangements that have become popular with banks and consumers.
Fannie Mae and Freddie Mac bought 40 percent of the conventional mortgages issued in 2004, down from 66 percent in 2003.
Syron said that statistic should make Congress more cautious in writing new regulations.
"You can't put a lot of burdens on us that you could have maybe when we were more of an oligopoly and didn't face private competition," he said.
The House bill would create a new, independent regulator that has the authority to determine the amount of capital Fannie Mae and Freddie Mac must have on hand and to force them to buy or sell assets if the companies run into financial trouble. It would also require Fannie Mae and Freddie Mac to set aside a portion of their after-tax profits to finance low-income housing. The proposed set-aside program has upset some members of Congress who fear that Fannie Mae and Freddie Mac will give the money to political allies.
While the Bush administration has complained that the House bill would not do enough to rein in the two companies, Syron said the House bill is "tough." He said that Freddie Mac's management supports stronger regulation of the company but that any legislation "must be consistent with long-term shareholder interest."
He said the company has taken no position on the proposed low-income housing fund. "We've tried to make it clear we have no clear dog in that fight," he said. But he added that there are "a lot of complicated questions about how that might be set up, how that might be funded."
He said that if Congress wants Fannie Mae and Freddie Mac to do more to finance affordable housing, it should take into account the companies' changing marketplace.
"We can only do that if we're viable competitive entities," he said.