By Suzanne Cosgrove

CHICAGO (MNI) – U.S. Treasury Undersecretary for Domestic Finance
Mary Miller Friday said it was “not in anyone’s interest to allow the
fiscal cliff to happen.”

“I think you know that would have a very negative outcome,” Miller
told a group of international bankers and academics at a Chicago Federal
Reserve Bank conference.

In response to a question about Fannie Mae and Freddie Mac, Miller
was fairly upbeat about the housing market outlook, saying the recovery
in housing will provide a better platform for housing finance reform.

In her prepared speech, Miller said she expected the Consumer
Financial Protection Bureau to finalize the qualified mortgage rule,
known as ‘QM’ in the coming weeks.

“Once the QM rule is complete, it will be important to finalize the
asset-backed securities risk retention rule, another rule in Dodd-Frank,
that affects mortgages and includes the qualified residential mortgage
definition,” Miller said.

Once final, these rules will enhance lender clarity at the point of
origination and improve investor confidence in loans purchased in the
secondary market, she added.

Miller noted that although Fannie and Freddie are in
conservatorship, they remain “pretty important for the housing market.”
A plan to gradually lessen that dependence on these government-sponsored
enterprises is needed, and will be put out for discussion, she said.

Miller also advocated greater oversight of rating agencies, but
acknowledged the discussion reducing reliance on rating agencies was
“one of the difficult parts of Dodd-Frank” as the market and regulators
look for alternatives.

In her prepared remarks, Miller said pressing ahead with financial
reform by finalizing mortgage finance rules, derivatives regulations and
the Basel capital rules – as well as protecting short-term funding
markets – was critical.

She said U.S. banking regulators “should be mindful of divergences
with their international peers, which may lead to international
regulatory arbitrage and uncertainty on the part of firms trying to
manage capital resources.”

Miller told the audience that she is seeing more “cooperation and
corroboration” among global regulators recently, far more than a few
years ago. “More are now seeing the benefits of a global trade
repository,” she said.

–email: scosgrove@mni-news.com

** MNI Chicago **

[TOPICS: M$U$$$,MGU$$$,MK$$$$,M$$AG$,MFU$$$]