US moves to protect Fannie and Freddie
Treasury extends line of credit to beleaguered mortgage lenders
WASHINGTON DC – Despite reassurances from the US Treasury last week, Treasury secretary Henry Paulson has acted to boost confidence in government mortgage financers Fannie Mae and Freddie Mac by extending Treasury lines of credit and giving the Federal Reserve a consultative role in regulating the government-sponsored enterprises (GSE).
In a prepared statement, Paulson emphasised the importance of Fannie and Freddie’s support for the housing market and stressed they should not be allowed to fail. “GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure.”
Paulson has introduced a three-part plan to help strengthen the entities. The first part concerns providing a liquidity backstop, the second includes temporary authority for the Treasury to purchase equity in either of the two GSEs if needed. The third concerns giving the Federal Reserve new oversight for the stability of the two firms. “To protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.”
This new role will cement the Fed as the lead agency in ensuring financial market stability in the US – just as outlined in the Treasury’s March Blueprint.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Risk, portfolio margin, regulation: regtech to the rescue
A white paper outlining the complexity of setting the course for risk, margin and regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
Most read
- Industry urges focus on initial margin instead of intraday VM
- For a growing number of banks, synthetics are the real deal
- Did Fed’s stress capital buffer blunt CCAR?