Statement of
The Honorable James B. Lockhart III, Director
Federal Housing Finance Agency
Before the Senate Committee on
Banking, Housing, and Urban Affairs
on the Appointment of FHFA as Conservator for
Fannie Mae and Freddie Mac
September 23, 2008
Chairman Dodd, Ranking Minority Member Shelby, and members of the Committee, thank you for the opportunity to testify on recent regulatory actions taken by the Federal Housing Finance Agency (FHFA) at Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac share the critical mission of providing stability, liquidity, and affordability to the housing market. Between them, these Enterprises have $5.3 trillion of guaranteed mortgage-backed securities (MBS) and debt outstanding, which is equal to the publicly held debt of the United States. Their market share of all new mortgages was 76 percent during the first half of this year. During the turmoil that started last year, they have played a very important role in providing liquidity to the conforming mortgage market. That has required a careful and delicate balance of mission with safety and soundness. A key component of this balance has been their ability to raise and maintain capital. Because of recent market conditions, that balance was upset. Unfortunately, as house prices, earnings and capital have continued to deteriorate, their ability to fulfill their mission has deteriorated. In particular, the capacity to raise capital to absorb further losses without Treasury Department support vanished. That left both Enterprises unable to provide counter-cyclical support. Worse, it threatened to require substantial shedding of current positions with attendant further damage to mortgage and housing markets.
FULL STATEMENT HERE:
http://www.ofheo.gov/newsroom.aspx?ID=465&q1=1&q2=None
