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Outside the spotlight is another lobbying effort involving a third government-sponsored enterprise -- the Federal Home Loan Bank system, a group of 12 "wholesale" banks that are owned by more than 8,000 community financial institutions around the country.

The FHLBanks, as they are known, provide low-cost funding to regional and commercial banks, credit unions, and insurance companies. Unlike Fannie Mae and Freddie Mac, the FHLBanks don't sell mortgage-backed securities, and their shares aren't publicly traded. Instead, financial institutions that buy Home Loan Bank stock are then able to tap the FHLBanks for capital.

"Fannie and Freddie are publicly traded, so their profit motives are different," said Eric Mondres, vice president and director of government relations for the Federal Home Loan Bank of Atlanta. "Our business model is [more like] a cooperative."

Some of the Home Loan Banks' 8,000 members are using the fight over GSE reform legislation as an opportunity to try to free up the FHLBanks to enter new lines of business. The Mortgage Bankers Association, which represents a number of banks that own Home Loan Bank stock, has lobbied for a provision that would allow the FHLBanks to guarantee and issue mortgage-backed securities, for example.

The FHLBanks themselves are divided over that idea. Some, like the Atlanta bank, support it. But Lawrence Parks, senior vice president of external and legislative affairs for the Federal Home Loan Bank of San Francisco, said, "We aren't favorably disposed to having that authority," because, he said, it could create regulatory complications.

America's Community Bankers, a trade association that represents many Home Loan Bank shareholders, has questioned whether new legislative language is necessary, arguing that the FHLBanks' regulator, the Federal Housing Finance Board, may already have the authority to let the banks enter new lines of business.

Some of the FHLBanks have weathered financial scandals of their own. In December, for example, the Federal Home Loan Bank of Seattle disclosed a 42 percent drop in annual earnings from 2003 to 2004, and acknowledged that it needed to improve its governance, risk management, and financial performance. And the Federal Home Loan Bank of Chicago last year reported that it had misapplied derivatives in its accounting process; the bank subsequently restated its earnings.

In testimony before the Senate Banking, Housing, and Urban Affairs Committee in April, Raymond Christman, president and CEO of the Atlanta bank, said that the FHLBanks have had to take steps to improve internal oversight, but he asserted that their regulatory structure is fundamentally sound. The FHLBanks must adhere to minimum capital standards and must abide by limits on the amount of debt they can hold in their portfolios. They must also set aside 10 percent of their income for investment in affordable-housing programs.

Parks told National Journal that the FHLBanks are lobbying Congress to keep regulation of the Home Loan Bank system separate from the oversight of Fannie and Freddie; they base their stance on the regional nature of the Home Loan Banks and their distinct business model. Specifically, Parks said, the FHLBanks want any new federal GSE regulatory agency to have two deputy directors -- one to oversee Fannie and Freddie, and one to oversee the FHLBanks.