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Shares of

Fannie Mae



Freddie Mac


were moderately lower Tuesday after Alan Greenspan threw his hat in for more regulation of the mortgage giants.

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Fannie Mae was recently down $1.54, or 2%, to $77.36, while Freddie Mac was off $1.10, or 1.7%, to $62.83. Both shares are still trading near the top of their 52-week range following the big runup in financial stocks around the turn of the year.

Tuesday's dip came after the


chairman, in testimony before the Senate Banking Committee, suggested that Congress limit the amount of debt the two companies are allowed to issue. Fannie and Freddie were founded at the behest of Congress to make a secondary market in home loans, buying them from banks in order to keep money flowing into residential lending.

Both companies have become immensely profitable because of their ability to finance those purchases at a below-market cost. The advantage exists because of perceptions the federal government would step in if these companies, which are known as government-sponsored enterprises, should ever get in trouble.

Greenspan said growth in the size of Fannie and Freddie's mortgage portfolios could become a problem down the road.

"The Federal Reserve is concerned about the growth and the scale of the GSEs' mortgage portfolios, which concentrated interest rate and prepayment risks at these two institutions," Greenspan said. To decrease the risk, Greenspan suggested Congress should cap the size of the portfolios, noting that even with limits, Fannie and Freddie would remain "among the largest financial institutions in the United States and would be able to grow with the size of the mortgage markets."

The Fed chief also called for the creation of a new regulator to oversee the companies, a recommendation that followed a perception that the current regulator, the Office of Federal Housing Enterprise Oversight, was sleeping while Freddie ran up accounting problems that required a multi-billion-dollar restatement late last year.