Mr. Chairman, thank you for convening this important hearing on oversight of the accounting practices of government-sponsored-enterprises (GSEs). These institutions serve as pillars of America's housing market by providing liquidity that has helped make the American Dream of homeownership a reality for millions of families.
Having said that, recent developments at Freddie Mac serve as cause for alarm. The ongoing accounting investigation at the company, the shake-up of its management team, and the seeming lack of internal controls are all troubling. Viewed together, they call into question, and require this committee to consider, the adequacy of the regulation provided for Freddie Mac, as well as Fannie Mae, to ensure their safety and soundness.
The size and complex financial structures of the two organizations - which account for billions of dollars in mortgage-finance dollars - along with their impact on our capital markets, on pension and mutual funds, and on individual investors, require a regulator that is both credible and capable at providing rigorous oversight.
In my opinion, the current state of GSE regulation fails to meet these critical tests. That is why I have come to the conclusion that GSE oversight would benefit by moving OFHEO - and its safety and soundness responsibilities - to the Department of Treasury, as a new, separate division with funding authority that moves them out of the appropriations process. However, in my view, the underlying housing mission of the GSEs - the annual housing goals and oversight of fair housing- should remain with HUD.
Such a move would instill confidence in investors, our capital markets, and members of Congress that GSE oversight is in the hands of a strong, robust and credible regulator.
No doubt, Mr. Chairman, there will be a wide variety of GSE "reform" proposals floated. As we consider these proposals, I hope we will ensure that they do not alter the structure and regulation of our GSEs in a manner that undermines the liquidity, innovation and speed to market of the products they bring to our housing market. All these features of GSE's have contributed to making America's housing finance system the most successful in the world. And our housing market has been one of the few positives in this economy.
I want to thank our witness, OFHEO Director Falcon, for joining us and providing us with his testimony today. I look forward to his thoughts regarding the Freddie Mac issue, and the current state of GSE regulation.
Thank you, Mr. Chairman.