Home About Latest Browse RSS Advanced Search

Federal Reserve Bank of Atlanta
Economic Review
Regulating housing GSEs: thoughts on institutional structure and authorities
W. Scott Frame
Lawrence J. White
Abstract

Many of the benefits that the housing government-sponsored enterprises (GSEs) transmit to homebuyers stem from an implied federal guarantee arising from the GSEs’ charter benefits and past supervisory forbearance. But this implicit guarantee also represents a risk to taxpayers if one of these GSEs—Fannie Mae, Freddie Mac, or the Federal Home Loan Bank (FHLB) System—becomes insolvent and the government provides financial assistance. ; In the wake of a $5 billion accounting restatement by Freddie Mac in 2003, concerns about taxpayer liability associated with the housing GSEs have led to various legislative proposals to reorganize their regulatory oversight. This article discusses these proposals, drawing on lessons from U.S. banking regulation to identify and evaluate the points of contention. ; The legislative proposals generally pertain to institutional design (where the safety-and-soundness regulator is located, how it is funded, and whom it should supervise) and institutional authorities (for example, discretion to alter capital requirements and the ability to appoint conservators and receivers). ; With respect to institutional design, the authors conclude that there may not be a clearly dominant approach. In regard to institutional authorities, the authors recommend that the safety-and-soundness regulator have responsibility for approving new programs and other activities, the discretion to set both minimum and risk-based capital requirements, receivership authority, and other enforcement authorities comparable to the federal banking agencies.


Download Full text
Cite this item
W. Scott Frame & Lawrence J. White, "Regulating housing GSEs: thoughts on institutional structure and authorities" , Federal Reserve Bank of Atlanta, Economic Review, issue Q 2, pages 87 - 102, 2004.
More from this series
JEL Classification:
Subject headings:
Keywords: Housing ; Government-sponsored enterprises
For corrections, contact Meredith Rector ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal