Mortgage Giants’ Chiefs Defend Their Businesses

The heads of mortgage giants Fannie Mae and Freddie Mac assured senators Wednesday that their collapse was unlikely, a day after Federal Reserve Chairman Alan Greenspan warned that they could pose a threat to the U.S. financial system if their ability to assume new debt isn’t restrained.

Fannie Mae Chief Executive Franklin Raines and Richard Syron, who was tapped to lead Freddie Mac after it lost its two previous chief executives in an accounting scandal, faced questioning by the Senate Banking Committee after Greenspan’s comments heightened the pressure for an overhaul of the two government-chartered firms.

Appearing before the same panel Tuesday, Greenspan lent his voice to calls for restraints on the operations of the two.

Fannie Mae and Freddie Mac have become among the largest U.S. financial institutions and now stand behind $4 trillion of home mortgages -- more than three-fourths of the single-family mortgages in the country.

Raines characterized as an “unlikely event” a major financial disaster that would jeopardize Fannie Mae. “I don’t view Fannie Mae and Freddie Mac as being repositories of risk,” he said.

Syron called the chance of Freddie Mac failing financially akin to that of “an asteroid hitting the United States.”

Raines and Syron also defended as socially indispensable their role in promoting homeownership among minorities and lower-income people, a service they said would be reduced if new restraints were imposed on their operations.

The Bush administration has asked Congress for a firmer government hand over the companies and wants to shift their financial oversight from the Department of Housing and Urban Development to the Treasury Department.

Sen. Richard C. Shelby (R-Ala.), the committee’s chairman, has said he would draft legislation that would go further, making the new regulator independent of either agency.

On the New York Stock Exchange, Fannie Mae shares fell 73 cents to $75.52 while Freddie Mac rose 57 cents to $62.69.