September 28, 2020
The Financial Stability Oversight Council (FSOC) signed off on the Federal Housing Finance Agency’s (FHFA) plan to rebuild Fannie Mae and Freddie Mac, saying the GSEs continue to pose a potential risk to financial stability and may not be sufficiently capitalized to protect themselves against risks in their portfolios. The council reached these conclusions in a two-month review of the secondary mortgage market.
To better mitigate the risks, the FSOC recommended that FHFA implement “regulatory capital definitions that are similar to those in the U.S. banking framework” and require the GSEs to be “sufficiently capitalized to remain viable” during and after a severe downturn.
In a statement, Fannie Mae CEO Hugh Frater called the review “another important milestone in FHFA’s efforts to issue a final capital rule and safely end the conservatorships of the GSEs.” Freddie Mac CEO David Brickman similarly said the review “signifies important momentum toward exiting conservatorship.”
Pictured: FHFA director Mark Calabria.
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