Magazine article American Banker

Regulator of Fannie, Freddie Sidelined in Disclosure Deal

Magazine article American Banker

Regulator of Fannie, Freddie Sidelined in Disclosure Deal

Article excerpt

Not everyone had reason to celebrate the truce struck last week by Rep. Richard H. Baker, R-La., with Freddie Mac and Fannie Mae.

In fact, the organization with perhaps the closest connection to Fannie and Freddie's risk management and disclosure practices, the Office of Federal Housing Enterprise Oversight, was noticeably absent when the agreement was announced last Thursday.

The GSEs' safety and soundness regulator acknowledged that it did not know anything about the negotiations, but downplayed the significance of the incident.

OFHEO director Armando Falcon said that he was not "trying to compliment or disparage" the GSEs' deal with Rep. Baker, "because we're still going through all the details." Fannie and Freddie "tell us that they're still working through the details themselves," he said. "It doesn't seem like even they have completely thought this through."

"These voluntary steps do not in any way substitute for strong regulation," and some of the points Rep. Baker and the GSEs agreed upon were already being developed by OFHEO, he said.

"What they've done isn't going to detract at all from our strong regulatory program, things that we have in place now, and things that we've had in the works," Mr. Falcon said. "We've even consulted with them on things we have underway but haven't quite announced yet. They chose to move forward with some small pieces of it, and that's up to them."

He would not reveal the specifics about those measures, but he said he has talked at length over the course of the year about things OFHEO wants to do to increase the GSEs' transparency, strengthen their capital, and increase their market discipline.

The agency will not do anything different from what it has planned for the rest of the year, despite last Thursday's deal, said Mr. Falcon, who plans to weigh in with his thoughts on the voluntary agreement at the Mortgage Bankers Association's annual convention next week in San Francisco. …

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