Focus Shifts to OFHEO's Capital-Rule Enforcement
Garver, Rob, American Banker
With the Office of Management and Budget's approval of a capital rule for Fannie Mae and Freddie Mac Monday, the spotlight now shifts to the tiny agency created to ensure the safe and sound operation of the mammoth government-sponsored enterprises.
The Office of Federal Housing Enterprise Oversight must prove that the 600-odd page rule, which it took more than nine years to write, will work as expected. "With the issuance of the final capital regulation the burden now shifts to OFHEO to administer it effectively," said industry lawyer and veteran GSE watcher Thomas H. Stanton.
OFHEO officials refused to discuss the new rule and will not make it public until Thursday. But though details were sparse, it was clear that Fannie and Freddie have substantial concerns about the rule, which is to take effect next July.
David M. Graifman, an analyst who follows Fannie and Freddie for Keefe, Bruyette & Woods Inc., said the GSEs want to make sure that they -- and their investors -- are not surprised by unexpectedly harsh enforcement.
The GSEs conducted an intense lobbying campaign to delay the rule's issuance, and its being made final has put them in a delicate position. Fannie and Freddie have criticized it privately in an attempt to persuade the Bush administration that OFHEO has not thought through the rule or tested it fully. But they have at the same time been publicly supportive, expressing confidence that when the rule is adopted it will be state-of-the-art.
In press releases issued after OMB announced the rule's approval late Monday, both Fannie and Freddie praised OFHEO for completing the rule and expressed support for a strong risk-based capital standard. But both also said they could not comment on specifics because they had yet to see the text. …