Opening Statements of Committee Members


Opening Statement of Subcommittee Chairman Wayne Allard (R-CO)

Hearing on the Mission of the Office of Federal Housing Enterprise Oversight (OFHEO)
and the Financial Safety and Soundness of Fannie Mae and Freddie Mac

Tuesday, May 8, 2001, 9:30 a.m - Dirksen 538

I want to welcome everyone to the Housing and Transportation Subcommittee. Today we will conduct a hearing on oversight of the mission of the Office of Federal Housing Enterprise Oversight (OFHEO) and the financial safety and soundness of Fannie Mae and Freddie Mac.

We have three witnesses. On the first panel we will hear from Mr. Armando Falcon, Director of OFHEO. On the second panel we will hear from Mr. Franklin Raines, Chairman and CEO of Fannie Mae, and Mr. Leland Brendsel, Chairman and CEO of Freddie Mac.

The American mortgage finance system is the envy of the world. Fannie Mae and Freddie Mac are a vital part of this system. They are among the largest financial institutions in the world.

While Fannie Mae and Freddie Mac are New York Stock Exchange listed companies owned by shareholders, they are also Government Sponsored Enterprises (GSEs) with the specific mission to increase homeownership. Due to their GSE status, the Congress of the United States has a significant oversight responsibility for Fannie Mae and Freddie Mac.

In 1992, Congress created OFHEO, an independent regulator within the Department of Housing and Urban Development, to regulate the financial safety and soundness of Fannie Mae and Freddie Mac. It has been five years since the Senate Banking Committee has conducted oversight of OFHEO. This is our purpose here today. We will focus on the central question of the effectiveness of OFHEO as a regulator.

This is a very important question, for together, the two housing GSEs hold mortgages and issue mortgage backed securities that total over $2 trillion. They also have outstanding debt in excess of $1 trillion, much of this held by U.S. commercial and savings banks. These numbers make it clear how important it is that there be a strong and effective safety and soundness regulator for Fannie Mae and Freddie Mac.

Today we have asked OFHEO to submit testimony on the adequacy of its resources, the status of its risk-based capital regulations, and the safety and soundness of the housing GSEs. We will then ask the Chairmen of Fannie Mae and Freddie Mac to testify to the effectiveness of OFHEO as a regulator, discuss the financial safety and soundness of their institutions, and provide an overview of the voluntary commitments made last year to provide greater public disclosure of their own risk assessments, implement a stress test system, increase liquidity, issue subordinated debt, and submit themselves to review by debt rating agencies.

I look forward to the testimony of our witnesses as we conduct oversight in this important area.