Hearing of the Senate Committee on Banking, Housing and Urban Affairs

HEARING OF THE SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

GOVERNMENT-SPONSORED ENTERPRISES

February 24, 2004 Tuesday

CHAIRED BY: SENATOR RICHARD SHELBY (R-AL)

LOCATION: 538 SENATE OFFICE BUILDING, WASHINGTON, D.C.

WITNESSES: FEDERAL RESERVE BOARD CHAIRMAN ALAN GREENSPAN

SEN. THOMAS CARPER (D-DE): Thank you, Mr. Chairman.

Chairman Greenspan, welcome. It seems like you were just here. I think you were. Welcome back. I read in some of the briefing material for today's hearing an explanation-I think it showed up in the American Banker-about different kinds of capital, from minimum to risk-based accord or a whole lot of others.

And so the question I'm going to be asking you, just to sort of telegraph my pitch, is to explain all those capital standards in ways that even former governors can understand. If you can do that today, you'll get an A+ from me, and maybe make those relevant to our discussion.

When I was governor of Delaware, we used to have sort of a slogan in our administration. You all heard, probably somewhere in your life, the axiom, if somebody did a job, didn't do it necessarily very well, they say, "That's good enough for government work." I never liked that.

Later on, I used to hear people say often, "If it ain't broke, don't fix it." And that applies, I guess, to things in as well as outside government. I've never been real crazy about that one either.

The slogan that we adopted for eight years was, "If it isn't perfect, make it better." And I think when you look at the way we regulate our GSEs, it's not perfect. We can make it better. But as we approach the job of doing that, I think it's important to keep in mind that today in this country, almost 70 percent of the people live in a home that they own. And it's a remarkable success story. In my little state, our home ownership is actually approving 75 percent.

And as we try to make what is not perfect more perfect, I think it's important that we do so in a way that does not undermine the remarkable success that we've had in fostering home ownership.

Welcome back. We look forward to your testimony.

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SEN. CARPER: Thanks. Chairman Greenspan, I have a couple of questions I'm going to ask. I'm going to ask you just to limit your responses and just be as direct with me as you can, and I know you will. Just-let's back up just for a moment and just share with-at least with me and maybe with some of my colleagues, what is the wrong that we're trying to right here? What is the potential harm that we are trying to avert?

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SEN. CARPER: You spoke of your own minority view as to the course that we should take with respect to-I think you said to privatizing. You also shared with us a different approach, and I believe it dealt with limiting GSE issuance of debt, and would you go back to that and just explain that again for us, please?

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SEN. CARPER: Okay. Well, my time has expired, Mr. Chairman. I had indicated earlier that I wanted to raise some questions relating to capital and the different kinds of capital. But I yield to Mr. Crapo over there because my suspicion is he or Enzi will probably get into that.

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