FHFA Prepared Remarks on Future of Fannie Mae and Freddie Mac
On May 13, the Federal Housing Finance Agency (FHFA) released an update titled Prepared Remarks of Melvin L. Watt, Director, FHFA at the Brookings Institution Forum on the Future of Fannie Mae and Freddie Mac.
Prepared Remarks of Melvin L. Watt, Director, FHFA at the Brookings Institution Forum on the Future of Fannie Mae and Freddie Mac
Managing the Present: The 2014 Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac
Thank you to the Brookings Institution for hosting this event and thank you for that introduction.
Let me begin my remarks today by talking about the Federal Housing Finance Agency’s (FHFA) work over the last four months. Since January, the agency has continued to carry out its day-to-day responsibilities as the regulator of the Federal Home Loan Banks and as the conservator and regulator of Fannie Mae and Freddie Mac (the Enterprises). Many of these decisions and responsibilities are often considered routine and may go unnoticed. But they are absolutely critical to the effective and efficient operation of the housing finance market. I can’t touch on all of these responsibilities in my remarks today, but I do want to give you a summary of what FHFA has been working on since I arrived and I hope this provides you with insight into the direction we’ll be headed in the future, particularly with reference to Fannie Mae and Freddie Mac.
In addition to overseeing our day-to-day operations, my work has also involved an overall assessment of FHFA as well as Fannie Mae and Freddie Mac. During this time, I’ve witnessed the dedication and expertise of FHFA staff at all levels, as well as the tenacity and dedication of the employees of Fannie Mae and Freddie Mac who continue to stay the course during these most difficult and uncertain times. And I would be remiss not to acknowledge and thank these staffs for their hard work. There’s been a constant urgency since the financial crisis. It has been a marathon, but I’m sure it has felt like a sprint. And everyone has continued to excel at every step along the way.
I also want to publicly thank Ed DeMarco for his lifelong career in public service, including his time as Acting Director of FHFA. In the face of the greatest economic collapse since the Great Depression, FHFA helped prevent an extremely bad situation from getting much worse. It’s hard to imagine things being worse given the depth of the housing market collapse, but I very much believe that FHFA and Ed DeMarco’s leadership prevented an even deeper financial collapse by stabilizing Fannie Mae and Freddie Mac.
Throughout his time at FHFA, Ed was instrumental in establishing the foundation for all that we will do going forward. So, while you may notice from my comments today certain changes in focus, you should know that I firmly believe we will be building on a very solid foundation.
As part of an overall assessment of the agency, we have been very focused on the numerous policy decisions that were and are in the pipeline. In making decisions about the future strategic direction of the Enterprise conservatorships, the principle we are following is how best to fulfill our obligations under current law. This means, first and foremost, that we must ensure that Fannie Mae and Freddie Mac operate in a safe and sound manner. It means that we’ll work to preserve and conserve Fannie Mae and Freddie Mac’s assets. And it means that we’ll work to ensure a liquid and efficient national housing finance market. Our job at FHFA is to balance these obligations, and that’s a message I’ll come back to throughout my remarks.
Another way of stating the principle that will be guiding us is that FHFA is focused on how we manage the present – the present conservatorships of the Enterprises and the present housing finance market under the present statutory mandates.
As a result, one topic that is not on FHFA’s agenda, because it’s not part of our statutory mandate, is housing finance reform legislation. My guess is that there were many people who expected that I would start talking about reform legislation the minute I got to FHFA. I am well aware, and regularly express my belief, that conservatorship should never be viewed as permanent or as a desirable end state and that housing finance reform is necessary. However, Congress and the Administration have the important job of deciding on housing finance reform legislation, not FHFA. Instead, our task is to continue to fulfill our statutory mandates, to execute our Strategic Plan and to manage the present status of Fannie Mae and Freddie Mac.
Today, we are releasing a new Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac along with their 2014 Conservatorship Scorecard. Both documents are built around three strategic goals: MAINTAIN, REDUCE and BUILD. I’d like to walk through each of these goals and discuss how they build upon and, in some cases, reformulate FHFA’s past conservatorship goals.
Please click here to view the speech in its entirety.
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