WASHINGTON — Treasury Secretary John Snow asked Congress on Wednesday for a stronger government hand over the mortgage companies Freddie Mac and Fannie Mae, saying "we cannot be complacent" about the economically vital housing market.
Snow opened a partisan debate over homeownership for low-income people by asking lawmakers to shift financial regulation of the two government-sponsored companies to his Treasury Department from the Department of Housing and Urban Development. The administration proposal he put forward would widen the government's authority over the two biggest players in the multitrillion-dollar home mortgage market, whose stock is widely traded.
The Treasury chief also proposed abolishing presidential appointments to the boards of the two politically influential companies, a system that enables presidents' allies and friends to reap tens or hundreds of thousands of dollars in fees, company stock and stock options.
"Housing finance is so important to our national economy that we need a strong, world-class regulatory agency to oversee" the financial operations of Fannie Mae and Freddie Mac, Snow told the House Financial Services Committee.
Snow said government needs to pay close attention "to the resilience of our system of housing finance."
Congress, which created the two companies and has not wanted to upset the housing market, now appears largely receptive to such a plan in the aftermath of Freddie Mac's accounting troubles — which brought the ouster of two chief executives since early June and investigations by the Justice Department and the Securities and Exchange Commission.
In a turnaround, Committee Chairman Rep. Michael Oxley, R-Ohio, the most frequent featured guest at 19 recent fund-raisers for GOP lawmakers staged by Freddie Mac's chief lobbyist, declared Wednesday his commitment to draft new legislation based on the administration plan.
Democrats complained about the plan to leave HUD with authority over the two companies' mission to expand homeownership, especially among lower-income people, while moving financial regulation to Treasury.
"I do not believe we are facing any kind of a crisis," declared Rep. Barney Frank of Massachusetts, the committee's senior Democrat. He warned it could be difficult for HUD to make the two companies meet the goals if regulatory power only resided in Treasury.
Rep. Mel Watt, D-N.C., insisted strong government control is needed in this area because most private businesses "don't give much of a damn about poor people and whether they have housing or not."
HUD Secretary Mel Martinez, appearing with Snow, said that "HUD is the appropriate agency to develop and enforce the housing goals."
Critics of stricter government regulation maintain it could roil the housing market, one of the few bright spots in a gloomy economy. The HUD agency that currently oversees the two companies has been criticized by some lawmakers as weak and ineffective and too slow to investigate Freddie Mac.
Freddie Mac, in a statement, said the administration appears to have a responsible plan. Fannie Mae Chairman and CEO Franklin Raines said his company also welcomed the proposal.
Freddie Mac, a $40 billion-a-year company based in McLean, Va., disclosed that accounting errors and manipulations of internal accounts resulted in its underreporting earnings by $1.5 billion to $4.5 billion in the 2000-02 period.