House Financial Services Chair Urges FHFA to Halt Efforts to Release GSEs from Conservatorship
Written By: Joel Palmer, Op-Ed Writer
The Chair of the House Committee on Financial Services has called upon the Federal Housing Finance Agency (FHFA) to halt efforts to release Fannie Mae and Freddie Mac from conservatorship.
Congresswoman Maxine Waters (D-CA) sent a letter to FHFA Director Mark Calabria last week accusing the director of trying to rush efforts to raise capital requirements for the GSEs and to release them for conservatorship.
“I believe that it is entirely inappropriate for you and your agency to be focusing on releasing the Enterprises from conservatorship during the pandemic with the assistance of a lame duck Treasury Secretary,” Waters, the committee chair, wrote to Calabria.
In her letter, Waters also called upon Calabria to testify to Congress this month, noting that the director has informed the committee he is unavailable.
“At the very least, the Congress and the American public deserve transparency from you. On behalf of current homeowners, renters, potential homebuyers, and more than 19 million prospective millennial homeowners, I urge you to fully engage with Congress by testifying before our Committee and to immediately halt your efforts to raise the Enterprises’ capital requirements and to release them from conservatorship. You should instead focus on ensuring that renters and homeowners are receiving the help they need during this pandemic. I look forward to working with you to find a mutually agreeable time for you to testify before the Committee.”
The letter was sent a day after Treasury Secretary Steve Mnuchin appeared before the committee. During the hearing, he suggested that the GSEs could be released from conservatorship before their full capital levels are reached.
It was just a month ago that FHFA released a final rule establishing a regulatory capital framework for Fannie and Freddie. The rule states that the GSEs must maintain tier 1 capital in excess of 4 percent to avoid restrictions on capital distributions and discretionary bonuses. That means as of June 30, 2020, the enterprises together would have been required to maintain $207 billion in common equity tier 1 capital, $265 billion in tier 1 capital, and $283 billion in adjusted total capital.
Mnuchin said during the hearing that while no decisions have been finalized, “there could be a scenario where at some point in between basically the zero capital they have, and the full capital requirement, there would be a consent order and they would be released subject to consent order.”
In her letter to Calabria, Waters wrote that the FHFA director should delay any decisions on capital requirements or GSE conservatorship until after President-Elect Joe Biden is sworn into office. Finalizing any so-called “midnight rules” during the last days of the Trump administration would, Waters wrote, “undermine our country’s regulatory process, and indeed our democracy, by rushing through controversial policies that could have sweeping effects on families and our economy without transparency, rigor, and legitimacy.”
Waters threatened that any actions taken by FHFA before President-Elect Biden is sworn in “will be met with heavy scrutiny and may be overturned under the Congressional Review Act during the next Congress.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
