Director of the U.S. Office of Federal Housing Enterprise Oversight (Ofheo) that oversees the activities of Fannie Mae and Freddie Mac, Armando Falcon is expected to push for greater powers given to regulator of the two mortgage giants, allowing for restrictions on their capital standards and portfolios. These points are mentioned in the draft of his speech at Senate Banking Committee hearing on Thursday.

"I am proud to say that OFHEO has been able to identify and correct the problems at Fannie Mae before more serious damage occurred," Falcon plans to say.

"But we might not be so fortunate the next time," he adds.

"Indeed the agency should have the authority to modify both minimum and risk-based capital standards," Falcon believes.

Yesterday Fannie Mae interim chief executive Daniel H. Mudd apologized for the accounting irregularities of the company in a speech in Congress.

Mudd and Freddie Mac chief executive Richard F. Syron agree to the creation of a new more powerful regulator, but claim that vesting it with powers to limit the creation of new mortgage products would put a brake on innovation. They are also against the imposition of limits on the two giants’ portfolios, saying this would simply shift the risk elsewhere in the financial markets.