älterer Artikel vom März,aber zeigt deutlich die Problematik
Washington, March 10 (Bloomberg) -- Fannie Mae and Freddie Mac,
which own or guarantee 42 percent of all U.S. home mortgages, may
lack adequate capital to weather a disruption in financial
markets, St. Louis Federal Reserve President William Poole said.
The two government-chartered companies "hold capital far below
that required of regulated banking institutions," Poole told an
Office of Federal Housing Enterprise Oversight symposium. "Should
either firm be rocked by a mistake or by an unforecastable shock,
in the absence of robust contingency arrangements the result
could be a crisis in U.S. financial markets," he said.
Shares of Fannie Mae and Freddie Mac tumbled as Poole suggested
severing the government's implied backing of the companies.
Poole's comments echoed criticism leveled against Fannie Mae and
Freddie Mac by competitors such as Wells Fargo & Co. and by
Representative Richard Baker of Louisiana, chairman of the House
subcommittee on capital markets.
They have said the companies use
their government ties to boost borrowings to levels that could
pose a risk to taxpayers. Fannie Mae and Freddie Mac own or
guarantee $3.1 trillion of mortgages.
The comments also come after Fannie Mae last year wrote down the
value of financial contracts used to hedge against interest rate
swings by $4.55 billion. Fannie Mae said it typically holds the
contracts, also known as derivatives, to maturity, meaning its
only risk is default by a counterparty, not quarterly changes in
their values. Accounting rules require the contracts be written
down to market values even if they are not sold.
Pull Sponsorship
The government should eliminate the Treasury's authority to buy
$2.25 billion of the companies' debt to remove any implied
sponsorship and appearances to investors that the U.S. would bail
out the firms in times of trouble, Poole said.
Eliminating the authority would signal the "government is serious
when it says that there is no guarantee" of the debts, he said.
Fannie Mae and Freddie Mac should also add to their capital over
a period of several years, he said.
The companies also need to boost their capital to levels similar
to that required for banks and other regulated institutions, he
said. Fannie Mae and Freddie Mac are required to keep capital of
about 4 percent of their on-balance sheet assets, he said, while
federally insured banks hold capital equal to about 11 percent of
their assets.
"It seems hard to justify not doing what he proposes," said James
McGlynn, who manages $5 billion at Summit Investment Partners in
Cincinnati. McGlynn owns securities that would benefit if Fannie
Mae shares decline.
Stringent Requirements
Fannie Mae and Freddie Mac countered that their capital standards
are more stringent than required of banks. The Office of Federal
Housing Enterprise Oversight, or Ofheo, is their main regulator.
"Our capital is tied to risk, and we are in one single line of
business which is the lowest-risk lending that is done," said
Sharon McHale, a Freddie Mac spokeswoman. "So when we tie risk to
capital standards, ours are much more stringent."
Fannie Mae said Poole's speech suggests he "does not understand"
the company's capital structure.
While there's "no current risk overhanging" the mortgage lenders,
now is the time to address potential problems brought on by their
size and influence in the mortgage markets, Poole said.
Fannie Mae and Freddie Mac make money by buying loans from banks
at higher rates than they pay to borrow. They sell debt to fund
mortgage purchases and also package mortgages into securities for
sale to investors. Outstanding debt sold by the companies totals
$855 billion for Fannie Mae and almost $700 billion for Freddie
Mac.
Housing Boom
The companies have benefited from a record housing market.
Earnings before one-time items at Fannie Mae rose to $6.39
billion last year from $3.91 billion in 1999.
"For Fannie Mae and Freddie Mac to hold more capital would slow
their growth," said Paul Miller, an analyst at Friedman Billings
Ramsey Inc. in Arlington, Virginia.
Miller said he will keep his "outperform" rating on the stocks
because Poole's proposals probably won't garner much support,
given that housing is one of the few areas of the economy still
growing.
Debt of Fannie Mae and Freddie Mac lagged gains in Treasuries
following the Poole comments, said Mike Graf, a managing director
of agency debt at Merrill Lynch & Co. The yield premium, or
spread, of Fannie Mae debt increased 2 basis points to 48 basis
points more than the 10-year Treasury.
Unseen Risks
Poole said that while both Fannie Mae and Freddie Mac use models
to measure the quantifiable risks of changes in credit quality
and interest rates, the danger resides in nonquantifiable risks
and "unpredicted crises," which, he said, occur far more often
than is recognized.
Poole cited the failure of the Penn-Central railroad, the hedge
fund Long Term Capital Management, Continental-Illinois bank,
Enron Corp. and WorldCom Inc.
Major unforeseen events that can bring about a collapse in
confidence or disruption to the normal function of financial
markets without any warning can and do occur with some frequency
he said.
Fannie Mae shares fell 18 percent in September after the lender
reported its duration gap, a key measure of interest-rate risk,
widened to minus 14 in August, outside its preferred range of
plus or minus 6. The gap meant Fannie Mae's assets would be
repaid 14 months sooner than its then $780 billion of debt.
The gap had closed to zero in January, Fannie Mae said.
