White House presses Congress on Fannie-Freddie legislation

The White House is pictured shortly after sunrise in Washington, August 1, 2007.

WASHINGTON (Reuters) - The "best thing" for Fannie Mae and Freddie Mac right now would be for Congress to pass new oversight legislation, the White House said on Friday, amid growing concerns about the mortgage giants' funding problems.

White House spokesman Tony Fratto declined to comment on what he called "any internal deliberations" when asked about a New York Times report that the government is considering taking over Fannie Mae and Freddie Mac if their troubles worsen.

Shares of the two government-sponsored entities, the nation's top providers of housing finance, plunged for a second day on Thursday as fears mounted over their ability to raise the capital they need to survive.

Fratto said President George W. Bush's economic advisers "always keep a close watch on the markets."

"The single best thing that could be accomplished right now with respect to Fannie Mae and Freddie Mac would be for Congress to pass and send to the president the Senate version of GSE oversight legislation," he added.

Fannie and Freddie are generally viewed as having the implicit backing of Washington and are considered the last bastions of support for a U.S. housing market in its worst downturn since the Great Depression of the 1930s.

They have been under fire this week as investors questioned the companies' ability to raise enough capital to stay afloat.

The New York Times said the government is considering a plan that would place the companies into conservatorship, citing people briefed about the plan.

This would mean that Fannie and Freddie's shares would be worth little or nothing, and that the losses on the home loans they own or guarantee -- half of all U.S. mortgages -- would be paid by taxpayers.

Officials involved in the discussions said no action by the administration is imminent, and that the companies were not considered in crisis, the newspaper said.

Treasury Secretary Henry Paulson told U.S. lawmakers on Thursday that Freddie and Fannie are "adequately capitalized."

(Reporting by Matt Spetalnick; Editing by Jonathan Oatis)