Greenspan Warns Senators of GSEs' Systemic Risk

By Kristin Roberts, Reuters

Federal Reserve Chairman Alan Greenspan fired the first shots of the year against Fannie Mae and Freddie Mac in a letter to senators calling on Congress to take aim at the mortgage giants’ $1.5 trillion investment portfolios.

Greenspan, in a Jan. 3 letter released on Thursday by New Hampshire Republican Sen. John Sununu, said Congress must give the federal regulator for the companies “clear and unambiguous” guidance on the purpose and function of those portfolios.

He said a bill passed last year by the House of Representatives fails to do that, and would not create an effective regulator for the government-sponsored enterprises or address the risk that he and others say the companies’ investments pose to the broader financial system.

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