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The Associated Press

June 24, 2003, Tuesday, BC cycle

Lawmaker proposing tighter regulation, new supervisor in response to Freddie

Mac's woes
BYLINE: By MARCY GORDON, AP Business Writer

SECTION: Business News; Washington Dateline

LENGTH: 645 words

WASHINGTON (AP) - Key lawmakers appeared cool Tuesday toward new House legislation prescribing tighter
regulation and a change in oversight in response to mortgage titan Freddie Mac's leadership and accounting problems.

The measure was proposed by Rep. Richard Baker, R-La., the most outspoken congressional critic of Freddie Mac and
Fannie Mae, its sister government-sponsored company. It would abolish the Office of Federal Housing Enterprise
Oversight, the agency of the Department of Housing and Urban Development that supervises both mortgage-dealing
companies.

In its place, the division of the Treasury Department that oversees savings and loan companies would regulate, with
greatly expanded powers, the two biggest players in the multitrillion-dollar home mortgage market.

Sen. Richard Shelby, R-Ala., chairman of the Senate Banking Committee, wasn't rushing to endorse the legislation.

"Senator Shelby would want to take a deliberative approach and not rush into anything," said committee spokesman
Andrew Gray.

Rep. Barney Frank of Massachusetts, senior Democrat on the House Financial Services Committee, said he hadn't yet
formed a view and that the issue of whether such legislation is needed should be examined.

"We're not talking about an immediate collapse. This is not Enron or Tyco," he said.

Baker, chairman of a House Financial Services subcommittee, has long contended that the Office of Federal Housing
Enterprise Oversight is too weak, and he has gained traction from the turbulence surrounding Freddie Mac. The
company is the subject of a criminal investigation by federal prosecutors and civil inquiries by the Securities and
Exchange Commission and the housing enterprise office. Baker told reporters Tuesday that "no one is exempt" from the
corporate responsibility rules enacted last summer amid the wave of accounting scandals.

A coming restatement of earnings at Freddie Mac for 2000-2002 could total $1 billion to $3 billion, which would put it
among the biggest corporate accounting debacles that have come to light over the past year or so.

"Precisely what transpired at Freddie Mac remains unclear and will take the combined effort of several ongoing
investigations to unravel," Baker said. "What is clear, however, is that this episode is but a symptom of a much larger
problem of gaps in Freddie's current regulatory supervision."
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Lawmaker proposing tighter regulation, new supervisor in response to Freddie Mac's woes The Associated Press June
24, 2003, Tuesday, BC cycle

Under his plan the Treasury agency would be empowered to define and limit the scope of Freddie Mac and Fannie
Mae's activities, restrict growth of their assets, and even put them into receivership and possible liquidation if it should
determine that their capital was seriously inadequate.

It also would be able to remove officers, directors and others from the companies and impose civil fines of up to $2
million a day on the companies or their executives for violations of law or regulations.

On Monday, before it was even made public, Baker's proposal drew criticism from the director of the housing enterprise
office that would be abolished and from Fannie Mae. A Freddie Mac spokesman declined comment.

McLean, Va.-based Freddie Mac, one of the biggest U.S. corporations with $39.7 billion in revenue, stunned markets
two weeks ago when it announced that it had fired its president, David Glenn, for what was said to have been his failure
to cooperate in an internal accounting review.

The company's chairman and chief executive, Leland Brendsel, resigned along with the chief financial officer, Vaughn
Clarke. Brendsel, though ousted by the board of directors, left with a $24 million compensation package.

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On the Net: Freddie Mac: http://www.freddiemac.com

Fannie Mae: http://www.fanniemae.com

Office of Federal Housing Enterprise Oversight: http://www.ofheo.gov

Securities and Exchange Commission: http://www.sec.gov

LANGUAGE: ENGLISH

Copyright 2003 Associated Press

All Rights Reserved