UPDATE 2-Obama taps NC official to regulate Fannie, Freddie

By Kevin Drawbaugh WASHINGTON, Nov 12 (Reuters) - President Barack Obama will nominate a state bank regulator to be the new head of the U.S. agency that oversees mortgage giants Fannie Mae and Freddie Mac, the White House said on Friday. At a time of crisis and growing calls for change in America's broken housing finance system, Obama intends to tap North Carolina Commissioner of Banks Joseph Smith to head the Federal Housing Finance Agency, the administration said. "Mr. Smith brings to this position both tremendous expertise and a deep commitment to strengthening our housing finance system for the American people," Obama said. I'm grateful that he has accepted this nomination, and I look forward to working with him in the months and years to come," the president said in a statement. At the height of the global financial crisis in 2008, both Fannie Mae and Freddie Mac were bailed out by taxpayers, seized by the government and put in federal conservatorship. They are now money-losing organizations that have soaked up $148 billion in bailout money and are under direct federal supervision. They stand behind 80 percent of new U.S. home mortgages. A major push to fundamentally reform them is expected to get under way in Congress within weeks. Smith, lawyer, has been North Carolina banks commissioner since June 2002, the White House said. His nomination is subject to Senate review, If confirmed, Smith would replace Edward DeMarco, acting FHFA director. The post also includes regulating 12 Federal Home Loan banks. The Obama administration is expected to unveil a plan for overhauling Fannie Mae and Freddie Mac in January. HOUSING IN CRISIS The $10-trillion U.S. housing market has been in a deep slump since a historic home price bubble burst in 2007-2008, hammering millions of homeowners and triggering a credit crisis that shook the world financial order. As the balance sheets of banks and other institutions crumbled under over-valued debt instruments backed by home mortgages, the role of Fannie Mae and Freddie Mac at the center of housing finance became ever more central. While the two helped bring about the crisis by chasing subprime mortgage lending profits, Fannie Mae and Freddie Mac also helped prevent it from getting worse by throwing their vast resources behind the market. Known as government-sponsored enterprises, or GSEs, the two companies' future was not addressed in sweeping Wall Street reforms approved in July. Both Democrats and Republicans expect GSE reform will be a major flashpoint in 2011-2012, with the parties deeply divided on how to go about it. Republican Representative Spencer Bachus, front-runner to head the House Financial Services Committee, told Reuters last week the GSEs should be in liquidation, not conservatorship. (Reporting by Steve Holland, Ross Colvin and Kevin Drawbaugh; Editing by Andrew Hay) Keywords: USA HOUSING/SMITH (kevin.drawbaugh@thomsonreuters.com, +1 202 898 8390, +1 202 488 3459 (fax)) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.