WASHINGTON — After moving Sunday to quell growing doubts about the stability of housing giants Freddie Mac and Fannie Mae, the Fed on Monday adopted new rules to protect home buyers from shady mortgage-lending practices.
Both actions reflect a more aggressive regulatory zeal at the Federal Reserve Board, which has been criticized for allowing the nation's housing market to overheat and ultimately embrace dangerously unsound practices that helped trigger the ongoing foreclosure, lending and credit crises.
But neither move improved the stock market’s outlook on the banking sector. Shares of Fannie Mae slipped 18 cents to finish at $10.08, while Freddie Mac shares dropped 66 cents to finish at $7.09. Banking stocks in general were also down.
Consumer advocates wanted the practice banned. Instead, the Fed left the issue open for further study and possible action later.
"The Fed should be applauded for at least stepping up to the plate, but if this had happened five years ago, we probably wouldn't have had a sub-prime crisis," said Kurt Eggert, a law professor at Chapman University in Orange, Calif., and a former member of the Federal Reserve Board's Consumer Advisory Council.
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