Yesterday, the House Financial Services Committee’s Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises held a hearing entitled “FHFA Oversight: Current State of the Housing Government Sponsored Enterprises.” Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA) testified before the Subcommittee.
In opening remarks, Chairman Paul E. Kanjorski (D-PA) and other Congressmen generally agreed that legislation to reform government sponsored enterprises (GSEs) is needed. Various Congressmen repeatedly pointed to the approximately $150 billion in taxpayer money which has already been spent to “prop up” Fannie Mae and Freddie Mac without any end to requests for more funding in sight. They generally agreed that Congress needs to limit taxpayer support of GSEs and set a deadline on winding support down.
In his prepared testimony, Mr. Edward J. DeMarco reported that the conservatorships of Fannie Mae and Freddie Mac, which have been in place since September 2008, have been effective to date, “instilling confidence in the market that they are capable of fulfilling their statutory roles.” However, he noted that although the GSEs have been “a key step to restoring market stability, neither company would be capable of serving the mortgage market today without the ongoing financial support provided by the U.S. Department of Treasury.” Further, Mr. Demarco also said that the conservatorships, while necessary in the short term, are not good long term solutions. Private capital needs to enter the mortgage market again; however, until Congress determines the future of the GSEs, Mr. Demarco stated that FHFA will continue to monitor the GSEs’ activities to “limit their risk exposure by avoiding new lines of business,” “ensure profitability in the new book of business without deterring market participation or hindering market recovery,” and “minimize losses on the mortgages already on their books.”
This testimony came just one day after FHFA released its 2009 Report to Congress, which presents the findings of the agency’s 2009 annual examinations of Fannie Mae and Freddie Mac.