This summer's rumblings about a new regulator for Fannie Mae and Freddie Mac proved accurate this fall. In September, Treasury Secretary John Snow proposed that regulation of the two housing finance giants be moved from the Office of Federal Housing Enterprise Oversight (OFHEO) to Treasury.

OFHEO has been strongly criticized for failing to address accounting issues at Freddie Mac, which this summer announced the departures of three executives and an earnings restatement of as much as $4.5 billion. "There is a general recognition that the supervisory system for housing-related government-sponsored enterprises (GSEs) neither has the tools nor the stature to deal effectively with the current size, complexity, and importance of these enterprises," Snow told a House of Representatives' committee. Treasury, with its financial expertise and political clout, does.

"Treasury has more credibility," explains Kent Colton, author of Housing in the 21st Century: Achieving Common Ground. "OFHEO hasn't developed the credibility, especially after it took them such a long time to develop the risk-based capital rule [a guideline for how much money the GSEs must have to cover their financial exposure]. In my opinion, Fannie and Freddie would benefit by having a strong regulator."

Many agree, pointing to Fannie and Freddie's crucial role in housing and the economy. "A strong regulator is in everyone's best interests--the [Bush] administration, Congress, Wall Street, investors worldwide, and, most importantly, the American taxpayer," says HUD Secretary Mel Martinez, who testified with Snow.

Not to mention builders. But the NAHB, while supportive of Treasury as a financial regulator, objects to giving oversight of Fannie's and Freddie's new housing programs to Treasury. "There is a fairly transparent inherent bias against housing in Treasury," notes NAHB executive director Jerry Howard, who says Treasury, unlike HUD, has traditionally not been responsive to housing issues like affordability concerns for middle-income Americans, for example. The NAHB also worries that Treasury, given its ties with big banks that compete with the GSEs, would prevent Fannie and Freddie from developing new mortgage products and innovations that HUD would embrace.

Finally, it is concerned that Freddie's accounting mishaps have metastasized into something far more threatening to builders. "Disenchanted competitors have taken this opportunity and used it as a referendum on Fannie, Freddie, and the entire housing finance system," Howard says. "We think that's a bad idea."