Washington, DC – Today, in response to Federal Housing Finance Agency (FHFA) Director Mel Watt’s testimony before Congress warning of a possible bailout of the government-sponsored enterprises (GSEs) from the U.S. Department of Treasury and supporting retention of the GSEs’ profits rather than turning them over to the U.S. Treasury, the National Community Reinvestment Coalition’s (NCRC) President and CEO John Taylor made the following statement.
“NCRC applauds Director Watt for acknowledging the critical step he must now take as conservator of the GSEs to prevent the foreseeable risk ahead to the housing market and affordable housing should Fannie and Freddie’s capital reserves dwindle to zero. The testimonies this week by Director Watt and next week by Treasury Secretary Steven Mnuchin present an opportunity for both agencies to move together to rebuild a capital buffer and put the GSEs on the path to end their long-standing conservatorship. Rebuilding the GSEs’ capital buffer is vital to protecting their role in ensuring affordable mortgage lending to low- and moderate-income families and communities. As Director Watt made clear, the current path of the GSEs’ conservatorship is not tenable. While the Housing and Economic Recovery Act (HERA) and the Senior Preferred Stock Purchase Agreements (PSPAs) clearly give FHFA the power to move ahead and withhold the GSEs’ dividend payments to the Treasury Department, we hope that both FHFA and Treasury will act in concert to ensure that the GSEs are on a safe and sound path forward.”
“Every quarter, millions of housing dollars at Fannie and Freddie that should be used to mitigate the growing affordable housing crisis in this country are simply being swept into the U.S. Treasury. Recapitalizing Fannie and Freddie and ending their conservatorship is the only sustainable way to allow them to fulfill their obligation to support affordable housing for all creditworthy borrowers. There is widespread agreement in Washington and across the country that we must end taxpayer-funded bailouts. The GSEs’ tenuous capital buffers are not a sufficient bulwark against a draw on their Treasury Department commitments. FHFA and Treasury must take immediate action to suspend dividend payments and shore up Fannie and Freddie’s reserves.”
In March, NCRC and other community groups sent a letter to Director Watt and Secretary Mnuchin expressing concerns about the declining capital buffer at Fannie Mae and Freddie Mac.
For prior letters, statements and paper regarding NCRC’s position on this issue, the following documents are available:
Letter to Director Watt and Secretary Mnuchin
Press release: Community Groups Call for Recapitalization of GSEs and End to Dividend Payments to U.S. Treasury
Letter to The Obama Administration from Community Groups
Press release: NCRC Applauds Letter from 32 Members of Congress to FHFA Director and Treasury Secretary Urging Adequate Capital at Fannie and Freddie
Press release: NCRC Reacts to FHFA Director Mel Watt’s Remarks at the Bipartisan Policy Center
For information on broader NCRC positions on GSE reform, visit the following:
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About NCRC:
NCRC and its grassroots member organizations create opportunities for people to build wealth. We work with community leaders, policymakers and financial institutions to champion fairness in banking, housing and business development.
