Fannie CEO Details Issues With GSE Bill

American Banker (06/05/08) P. 1; Sloan, Steven
Fannie Mae CEO Daniel Mudd recently spoke out about legislation to reform the government-sponsored enterprises (GSEs) that would create a new regulator, require the GSEs to contribute a portion of their private profits to foreclosure prevention program, restrict their ability to retain jumbo mortgages in their portfolios, allow the new oversight body to set minimum capital requirements and mandate regulatory approval before new products can be rolled out. In criticizing the diversion of profits to a public program, Mudd noted, "We were explicitly set up not to sit on the full faith and credit of the government, so now we're taking money out of the private market and using it to defray the cost of a government program. The logic seems to be getting a little circuitous." Additionally, he said the GSEs are more knowledgeable about affordable housing programs and insisted that they should be permitted to hold onto more jumbo loans given that investors are not in the market for such securities at the present time. Furthermore, Mudd noted that seeking regulatory approval for new products would take too much time and prevent the GSEs from responding to market conditions; and he recommended that the legislation be clear about the new regulator's power, particularly when it comes to capital requirements. "The more that that's elaborated in the legislation, the better," he declared. "The whole mortgage finance market is built around how much capital we hold."