DJ OFHEO Tells Congress Fannie Mae, Freddie Mac Safe, Sound
15 Jun 16:09
By Jennifer Corbett Dooren
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Fannie Mae (FNM) and Freddie Mac (FRE) had record
profits and exceeded all safety and soundness requirements last year, the
firms' regulator told Congress Friday.
Fannie and Freddie's regulator, the Office of Federal Housing Enterprise
Oversight (OFHEO), made its comments in its annual report to Congress. Fannie
and Freddie are government-sponsored enterprises (GSEs) charged with assuring
nationwide access to mortgage funds.
OFHEO noted that both Fannie and Freddie continued to reduce their exposure
to mortgage credit risk. Credit-related expenses fell a combined 30%, which
OFHEO attributed to the strong economy and housing market and successful credit
management practice on Fannie and Freddie's part.
OFHEO conducts annual risk-based examinations of both GSEs. OFHEO said the
firms "exceeded safety and soundness requirements" in all 10 examination areas
including credit risk, interest-rate risk, liquidity risk, operations and
corporate governance.
OFHEO said its biggest achievement last year was completion of a risk-based
capital rule, which was several years overdue.
The rule, currently under review by the Office of Management and Budget, will
require Fannie and Freddie to hold enough capital to withstand a 10-year,
nationwide economic downturn. OFHEO's director Armando Falcon has said he hopes
the rule will become later this year.
OFHEO also reiterated its call to be removed from the annual appropriations
process as is the case for other federal banking regulators, and for more
money. OFHEO is funded by assessments levied on Fannie and Freddie, but
Congress must still appropriate the money.
"OFHEO must ensure that it has the resources, expertise and infrastructure
necessary to properly oversee the enterprises in a changing market
environment," Falcon said in the report.
Even OFHEO's harshest critics, like Rep. Richard Baker, R-La., agree the
agency has been underfunded since Congress established it in 1992.
Baker, chairman of the House Financial Services subcommittee on GSEs, is
author of legislation that would eliminate OFHEO and give supervision of Fannie
and Freddie to the Federal Reserve. But his legislation so far has little
support.
Senate Banking Chairman Paul Sarbanes, D-Md., has said he prefers to see what
OFHEO's risk-based capital rule looks like before discussing any regulatory
change for Fannie and Freddie. Both the Senate and House banking panels have
jurisdiction over the firms. |
