Treasury to hold GSE summit next week

By Patrick Rucker

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson will convene a meeting next week with the heads of mortgage finance giants Fannie Mae and Freddie Mac and leading senators to discuss legislation that would create a stronger regulator, a Treasury spokeswoman said on Thursday.

In recent months, Paulson has helped the mortgage finance companies expand their investment holdings and buy larger home loans in order to stabilize the housing sector, but he has not been able to broker a deal over a new regulator.

As lawmakers look forward to the summer break, fall elections and a new presidential administration, Paulson only has a short time to help forge a new regulator for the nation's two largest sources of mortgage finance.

Treasury spokeswoman Jennifer Zuccarelli said the meeting would take place next week but would not discuss details.

Richard Syron and Daniel Mudd, the chiefs of Freddie Mac and Fannie Mae, respectively, will meet Paulson along with Sen. Christopher Dodd, the Connecticut Democrat who chairs the Senate Banking Committee, and Sen. Richard Shelby, the committee's ranking Republican.

Paulson and Robert Steel, Treasury undersecretary for domestic finance, have pushed legislators for months to finalize a new regulatory framework for Fannie and Freddie while they also grapple with the housing crisis. Steel is also scheduled to attend the meeting.

Fannie and Freddie, which are Congressionally chartered but privately run, are formally regulated by the Office of Federal Housing Enterprise Oversight, although Paulson has had a strong hand in the initiatives of recent months. James Lockhart, the OFHEO director, was not due to take part in next week's meeting, sources familiar with the meeting said.

Doug Duvall, a Freddie spokesman, said the Virginia-based company was "carrying through on our commitment to be a constructive part of the (legislative) process and will work closely with the (Banking) Committee going forward."