Lockhart Outlines FHFA Challenges

ng before the National Press Club last week, Federal Housing Finance Agency (FHFA) Director [link=http://www.fhfa.gov/webfiles/14715/FHFA1stAnnSpeechandPPT73009.pdf][u]James Lockhart[/u][/link] said the agency has ‘accomplished a lot, but we have much more to do.’ What might not be included in the FHFA's to-do list is full repayment of government aid. Fannie Mae and Freddie Mac have absorbed $84.9 billion since they were placed into conservatorship last year. "Some assets and senior preferreds will have to be left behind as they come out of conservatorship, and that means some of those losses will never be repaid," Lockhart said after his speech, as reported by [link=http://www.bloomberg.com/apps/news?pid=20601103&sid=aEwoLtQMHq5Y][u]Bloomberg[/u][/link]. "Their book is so large, it's hard for me to see that they will be able to repay all of that." Lockhart also said the biggest challenges facing the 12 Federal Home Loan Banks include managing capital prudently, given some of the banks' exposure to private-label mortgage-backed securities (MBS), and ensuring more consistency in financial disclosures and accounting. The FHFA has been working with the banks to develop a common accounting platform for their priviate-label MBS. Lockhart additionally emphasized the need to shift the regulatory framework for the government-sponsored enterprises toward countercyclical policies, particularly capital policies, that will help curb asset price bubbles and improve the odds that an institution can survive a crisis. "We need new policies that strengthen the ability of financial institutions to withstand distress by encouraging or requiring them to build up capital reserves in good times instead of having to rebuild capital in bad times," Lockhart said. SOURCES: [link=http://www.fhfa.gov]FHFA[/link], [link=http://www.bloomberg.com]Bloomberg


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