Greenspan Urges Curbs, More Fannie Problems Found By Kristin Roberts WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan on Wednesday told Congress to curb the rapid growth of Fannie Mae and Freddie Mac to cut the risks the mortgage giants pose to the financial system, just as a U.S. regulator unveiled new accounting problems at Fannie. In tough testimony delivered to the Senate Banking Committee, Greenspan said regulation without growth restraints could actually worsen the dangers the companies pose. "This is the heart of a dilemma in designing regulation for GSEs." "World-class regulation, by itself, may not be sufficient and, indeed, might even worsen the potential for systemic risk if market participants inferred from such regulation that the government would be more likely to back GSE debt in the event of financial stress," Greenspan said. But he proposed a solution. "We at the Federal Reserve believe this dilemma would be resolved by placing limits on the GSEs' portfolios of assets, perhaps as a share of single-family home mortgages outstanding or some other variation of such a ratio," the Fed chief said. On the other side of Capitol Hill, Armando Falcon, director of Fannie's and Freddie's regulator, outlined a fresh series of accounting missteps at Fannie Mae, where problems identified so may lead to a profit restatement of as much as $11 billion. Falcon, in comments prepared for delivery to a House Financial Services Committee panel, said new concerns at Fannie Mae reflect the company's "tendency toward overly aggressive interpretation" of accounting rules, and in some instances, "willful disregard" of standards. The testimony from Greenspan and Falcon comes as Congress considers legislation to create a tougher regulator for the government-sponsored housing enterprises -- shareholder-owned companies with a Congressional mandate to boosting homeownership by ensuring a liquid mortgage market. Both companies have been scarred by multibillion-dollar accounting scandals, and some Republicans have proposed vastly enhanced federal powers of the GSEs' business. Shares of Fannie Mae traded rose $1.38, or by more than 1.5 percent, to $53.66 while Freddie Mac's stock were up $1.99, or more than 3 percent higher at $63.75 in morning trade. "The comments appear extremely consistent with what Greenspan has said all along, that the GSE portfolios are too big, and that better regulatory oversight alone without limiting the portfolios' size will not reduce the systemic risk to the financial system," said Brian Robinson, senior bond strategist at 4CAST Ltd. in New York.     Continued ... Quelle "Greenspan Urges Curbs, More Fannie Problems Found" : reuters.com Main page for "Greenspan Urges Curbs, More Fannie Problems Found"