Alongside the release of President Bush's budget proposal for 2007, the White House asked Congress to create a new regulator for home mortgage giants Fannie Mae and Freddie Mac. The regulator would be directed to cut the $1.4 trillion investment portfolios held by the companies.

In the budget proposal, the White House says that it believes the portfolios of loans and securities held by the government-sponsored firms pose a risk to the broader financial system by aggregating interest rates and requiring large amounts of hedging.

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