<Link please.<
Again?
How many times do I have to post it?
marketwatch.com
ublished: Nov 6, 2003 4:50 p.m. ET
WASHINGTON (CBS.MW) - The notion that the U.S. government would bail out Fannie Mae and Freddie Mac if they ran into financial trouble "creates a source of systemic risk for our financial system," a top White House economic adviser warned Thursday.
Fannie Mae and Freddie Mac government-sponsored enterprises created by Congress to help fund home mortgages, enjoy special privileges, such as lines of credit with the Treasury Department.
Those special privileges "feed market perceptions that GSE debt has the backing of the U.S. government," said Gregory Mankiw, chairman of the administration's Council of Economic Advisers. "This notion is inaccurate."
"Due to the enormous size of the mortgage-backed securities market, any problems at Fannie Mae and Freddie Mac would have a ripple effect, Mankiw said.
"This risk is a systemic issue also because the debt obligations of the housing GSEs are widely held by other financial institutions," he said."
Here is the September 2003 House Finance Regulation Video from CSPAN
http://www.c-span.org/video/?178110-1/housing-finance-regulation
Statement by Barney Frank (D) 4:45
I APPRECIATE HEARING FROM THE TWO CABINET SECRETARIES, BUT WOULD LIKE TO SAY AT THE OUTSET, BEFORE WE MOVE ON LEGISLATION, I WOULD HOPE WE WOULD HAVE SECURITY, IN PARTICULAR, IMPORTANCE IN HOUSING. I WANT TO BEGIN BY SAYING, I DO NOT THINK WE ARE FACING ANY KIND OF A CRISIS. THAT IS, IN MY VIEW, THE TWO GOVERNMENT ENTERPRISES WE TALK ABOUT, FANNIE MAE AND FREDDIE MAC, ARE NOT IN CRISIS. RECENTLY ACCOUNTING PROBLEM WITH FREDDIE MAC, DISMISSED AS APPEARS TO BE APPROPRIATE. I DO NOT THINK AT THIS POINT THERE IS A PROBLEM WITH A THREAT TO THE TREASURY.
Treasury Secretary 41:30
TO DISCUSS THESE VERY IMPORTANT MATTERS RELATING GSE OVERSIGHT AND REGULATION. SECRETARY SNOW HAS OUTLINED PRINCIPLES AND PRIORITIES THE ADMINISTRATION SUPPORTS. HE AND I ARE IN FULL AGREEMENT. CONGRESS AND ADMINISTRATION HAVE AN OPPORTUNITY AND AN OBLIGATION TO STRENGTHEN THE REGULATORY STRUCTURE OF THE GSE'S. A STRONG REGULATOR IS IN EVERYONE'S BEST INTERESTS. THE ADMINISTRATION AND THE CONGRESS, WALL STREET, INVESTORS WORLD-WIDE, AND MOST IMPORTANTLY THE AMERICAN TAXPAYER. ADMINISTRATION HAS A DUAL GOAL. WE MUST ENSURE THROUGH THE GSE'S FINANCING IS AVAILABLE FOR LOW AND MODERATE INCOME FAMILIES, AND WE MUST ENSURE THAT THE GSE'S ARE SUBJECT TO RIGOROUS OVERSIGHT SO THEY ARE SERVING THEIR PUBLIC PURPOSE. THE HOUSING SECTOR DIRECTLY ACCOUNTS FOR ABOUT 14% OF THE NATION'S TOTAL GROSS DOMESTIC PRODUCT, AND HOUSING MARKET DRIVES CLOSELY RELATED COMPONENTS OF THE ECONOMY AS WELL. THE GSE'S PLAY AN INTEGRAL ROLE IN OUR NATION'S HOUSING FINANCE SYSTEM BY EXPANDING THE AVAILABILITY OF MORTGAGE CREDIT. THE LIQUIDITY AND STABILITY THEY PROVIDE HAVE HELPED BUOY THE NATION'S ECONOMY. BECAUSE OF THE HOUSING GSE'S IMPACT ON THE ECONOMY, IT IS CRITICAL THAT WE ENSURE THEIR SAFETY AND THEIR SOUNDNESS. OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT WAS ESTABLISHED FOLLOWING THE THRIFT CRISIS AS AN INDEPENDENT SAFETY AND SOUNDNESS REGULATOR. IT WAS PLACED WITHIN HUD -- I'M SORRY. IT WAS PLACED WITHIN HUD AND WAS ESSENTIALLY TO REGULATE FANNIE MAE AND FREDDIE MAC. THERE IS MISCONCEPTION THAT HUD CONTROLS AND HAS DIRECT AUTHORITY IN THE EXERCISE OF SAFETY AND SOUNDNESS DUTIES. HUD DOES NOT. BY STATUTE, CONGRESS HAS MANTATED THAT SAFETY AND SOUNDNESS DETERMINATIONS MUST BE MADE INDEPENDENTLY OF HUD. TO ENSURE THE GSE'S HAVE APPROPRIATE FINANCIAL OVERSIGHT AND ARE HELD ACCOUNTABLE TO THEIR PUBLIC MISSION, THE ADMINISTRATION SUPPORTS STRENGTHENING THE POWER OF THE GSE'S REGULATOR. DOING SO WOULD MAKE THE REGULATOR MORE COMPARABLE TO THE OTHER FINANCIAL REGULATORS CHARGED WITH THE SAFETY AND SOUNDNESS OVERSIGHT. SUCH A CONCEPT HAS WORKED WELL FOR FINANCIAL REGULATORS IN OTHER INSTANCES, INCLUDING THE CURRENCY AND OFFICE OF THRIFT SUPERVISION. CURRENTLY, SAFETY AND SOUNDNESS REGULATION IS DIVIDED, WITH NEW PROGRAM APPROVAL, AUTHORITY AT HUD, AND FINANCIAL OVERSIGHT. IT IS THE POSITION OF THE ADMINISTRATION THAT BOTH ELEMENTS OF SAFETY AND SOUNDNESS REGULATION NEED TO BE CONSOLIDATED IN A SINGLE REGULATOR. AS SECRETARY SNOW NOTED, THE ADMINISTRATION CONSIDERS IT APPROPRIATE TO TRANSFER AUTHORITY OVER THE PROGRAM APPROVAL FROM HUD TO A NEW STRENGTHENED REGULATOR. HUD SUPPORTS STRENGTHENING SUCH AUTHORITY TO INCLUDE REVIEW OF ALL ACTIVITIES, NEW AND ONGOING, AND SUCH CHANGES WILL CONSOLIDATE AND ENHANCE THE REGULATOR'S OVERSIGHT RESPONSIBILITY, AND INCREASE INVESTOR CONFIDENCE IN THE GSE'S. AS PART OF THIS TRANSFER, THE ADMINISTRATION IS ALSO PROPOSING THE HUD SECRETARY CONTINUE TO BE CONSULTED ON NEW ACTIVITIES REQUESTED BY THE GSE'S. MANY NEW ACTIVITIES DIRECTLY IMPACT THE MORTGAGE AND HOUSING MARKETS, WHERE HUD HAS FINANCIAL EXPERTISE. THIS MAKES IT ESSENTIAL TO SUCH CONSULTATION TAKING PLACE. WHILE SAFETY AND SOUNDNESS REGULATION SHOULD BE EXERCISED BY A SINGLE INDEPENDENT REGULATOR, THE ADMINISTRATION STRONGLY SUPPORTS RETAINING ANOTHER CORE ELEMENT OF THE GSE'S CHARTER, THE HOUSING GOALS AT HUD. CONGRESS ESTABLISHED FANNIE MAE AND FREDDIE MAC TO PROVIDE MARKET LIQUIDITY AND FACILITATE FINANCING OF AFFORDABLE HOUSING FOR LOW AND MODERATE INCOME FAMILIES. CONGRESS ALSO MANDATED HUD SECRETARY SET HOUSING GOALS TO ENSURE THOSE NEEDS ARE MET. THE AFFORDABLE HOUSING GOALS WERE CREATED TO ENSURE THE GSE'S ARE SERVING INDIVIDUALS IN THOSE COMMUNITIES THAT ARE MOST IN NEED. THESE GOALS DIRECT THE GSE'S TO SERVE LOW AND MODERATE-INCOME FAMILIES, AND PROVIDE FUNDING IN UNDERSERVED AREAS SUCH AS CENTRAL CITIES AND RURAL AREAS. THE THIRD GOAL DIRECTS THE GSE'S TO FINANCE HOUSING FOR VERY LOW AND LOW INCOME FAMILIES. TODAY, THE LOW AND MODERATE INCOME HOUSING GOALS REQUIRE THAT AT LEAST HALF OF ALL OF FANNIE MAE AND FREDDIE MAC'S MORTGAGE PURCHASES BENEFIT FAMILIES IN THOSE INCOME BRACKETS. BUT AS THE PRESIDENT'S BUDGET NOTED IN FEBRUARY, NUMEROUS HUD STUDIES AND INDEPENDENT ANALYSISES HAVE SHOWN THAT THE GSE'S HAVE HISTORICALLY LAGGED THE PRIMARY MARKET INSTEAD OF LED IT. WITH RESPECT TO FUNDING MORTGAGE LOANS FOR LOW INCOME AND MINORITY HOUSEHOLDS. THE GSE'S ALSO ACCOUNTED FOR A RELATIVELY SMALL SHARE OF THE FIRST TIME MINORITY HOME BUYERS. HUD IS THE APPROPRIATE AGENCY TO DEVELOP AND ENFORCE THE HOUSING GOALS, INSTITUTIONALLY OUR MISSION IS DEVOTED TO FURTHERING THE GOAL OF AFFORDABLE HOUSING AND HOMEOWNERSHIP, AND HUD HAS THE MOST EXPERTISE IN THIS AREA. FURTHERMORE, THE HOUSING INDUSTRY LOOKS TO HUD AS AN AGENCY IN WHICH THIS AUTHORITY SHOULD RESIDE. THEREFORE, TO STRENGTHEN HUD'S HOUSING GOAL AUTHORITY, THE ADMINISTRATION CONSIDERS IT APPROPRIATE TO, NUMBER ONE, CREATE NEW GSE HOUSING OFFICE WITHIN HUD, INDEPENDENTLY FUNDED BY THE GSE'S, TO ESTABLISH, MAINTAIN, AND ENFORCE THE HOUSING GOALS. NUMBER 2, GRANT HUD NEW ADMINISTRATIVE AUTHORITY TO ENFORCE ITS HOUSING GOALS. THIRDLY, TO INSTITUTE PENALTIES. THAT GSE ACT TO INCREASE HOMEOWNERSHIP AND EXPANDED AUTHORITY TO SET HOUSING GOALS AND SUBGOALS BEYOND THE THREE CURRENTLY ESTABLISHED FOR MODERATE INCOME, GEOGRAPHIC AREA AND SPECIAL AFFORDABLE HOUSING. LET ME STRESS THAT WE BELIEVE SUCH A COMPREHENSIVE CHANGE TO THE REGULATORY STRUCTURE WILL STRENGTHEN THE CONFIDENCE OF ALL GSE STAKEHOLDERS. INVESTORS WILL BE BETTER PROTECTED UNDER A REGULATORY SYSTEM THAT EMPOWERS THE REGULATOR TO DO THE JOB WE EXPECT OF THEM, AND THE AMERICAN TAXPAYERS WILL ULTIMATELY BENEFIT.
Paul E. Kanjorski U.S. Representative[D] Pennsylvania 1:06:00
THANK YOU, MR. CHAIRMAN. MR. SECRETARY, LET ME GET THIS STRAIGHT, YOU DID ANSWER MR. FRANK'S TESTIMONY THAT THERE IS NOTHING OCCURRING OF HIGH RISK AND SINCE WE ARE TALKING ABOUT REFORMING SOME OF THE LARGEST FINANCIAL INSTITUTIONS AND THEIR REGULATORY MECHANISM, WHAT IS THE PRESSURE TO DO THIS IN THE NEXT SIX WEEKS? CONGRESS IS ANTICIPATED TO ADJOURN SOMETIME LATE OCTOBER, EARLY NOVEMBER. THIS PROPOSAL COMES TO US TIMELY. WE'RE GLAD TO HAVE THE ADMINISTRATION MAKE A PROPOSAL BUT TO PUT A SIX OR EIGHT WEEK TIME ON IT RAISES SOME INTERESTING QUESTIONS |
