Ensuring that Fannie Mae and Freddie Mac have bank-like resolution plans in place in the event the Federal Housing Finance Agency is appointed receiver “enhances the integrity of the entire Dodd-Frank orderly resolution system,” FHFA Director Mark Calabria said today during remarks at a Brookings Institution event today.
“Fannie Mae and Freddie Mac own or guarantee more than $6 trillion in single-family and multifamily mortgages—half the market,” Calabria said. “Taken together, these enterprises are roughly equal in size to the top three largest banks in America combined. And they are bigger than the 4th through 15th biggest banks combined. Yet while banks must operate with leverage around 10 to 1, the Enterprises have only recently reduced their leverage to 140 to 1. That is not enough capital for them to survive a housing downturn.”
After receiving comments from industry stakeholders, including ABA, FHFA earlier this month finalized its resolution planning rule, which directs the GSEs to submit resolution plans every two years that identify core business lines and the operations, services, functions and supports necessary for these business lines to be continued. Calabria added that “FHFA is committed to doing everything in our legal power to avoid an unnecessary receivership,” and that FHFA has focused on ensuring that the GSEs are well-capitalized, but that “we have to be ready.”