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GSE Reform is on the Menu, Geithner Says

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US Treasury Department secretary Timothy Geithner noted the Obama Administration is planning to reform the mortgage finance industry and the government-sponsored enterprises (GSEs) as part of its move to bring greater clarity and regulation to the broader financial system. His comments, delivered at New York University, arrive after Obama signed the Dodd-Frank financial reform act in July. Notably absent from that legislation, however, was a means of reforming the GSEs Fannie Mae and Freddie Mac and removing them from conservatorship. Geithner said the Treasury is moving forward on reforming the GSEs and the housing finance system outside of the recenlty signed law, beginning on August 17 with a conference to be held in Washington DC. "Later this month, we will bring together at the Treasury Department leading academic experts, consumer and community organizations, industry participants and other stakeholders for a conference of experts focused on the future of housing finance," Geithner said. "We'll use the conference to explore various models of reform and we will seek input from across the political and ideological spectrum." The Treasury also plans to meet with mortgage companies and other housing industry players in September to explore ways to achieve simpler disclosure for consumers, he said. The administration will invite public comment on new national mortgage underwriting standards. Geithner noted that policy-makers, regulators and supervisors must move on reform at a quick pace and with full transparency. The financial system needs clarity in regulation and elimination of outdated rules. He said the system also needs reform that does not sacrifice its freedom to innovate responsibly. Industry groups are alerady issuing statements in support of that financial innovation. "Secretary Geithner's remarks today correctly focused on the need to strike the right balance between fully implementing the reforms contained in the Dodd-Frank Act while maintaining our industry's ability to innovate and grow," said Securities Industry and Financial Markets Association (SIFMA) president and CEO Tim Ryan. "Maintaining this balance will be critical throughout the rule-making process and we are heartened to see the Administration take the same approach as we all work to ensure financing and the availability of capital to support innovation in America, strengthen our economy and create jobs." Geithner noted that reform will level the playing field, both among bank and non-bank entities and among financial systems abroad. The administration will seek more order and coordination in the regulatory process, partly through consolidating authority spread broadly across multiple agencies. The administration is also shaping reform of the derivatives market, beginning with an outline for moving the standardized part of the over-the-counter derivatives business onto central clearing houses. Write to Diana Golobay.

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