Last year, in an effort to ensure the financial safety and soundness of [Fannie Mae and Freddie Mac], Congress created the office of Federal Housing Enterprise Oversight and required this new office to develop comprehensive risk-based capital standards by the end of 1994.
The establishment and enforcement of meaningful capital standards for these two federally chartered corporations is critically important because, while they pose no immediate risk to taxpayers, they remain two of the most thinly capatalized fimancial institutions in the country.
Staff Limit Troubling
At the time the Office of Federal Housing Enterprise Oversight was established I expressed my concern that the regulator lacked the independence and stature necessary to properly monitor and regulate the financial operations of Fannie Mae and Freddie Mac.
I still have these concerns, and while I hope they prove misplaced, the recent congressional actions to cap the staffing of OF-HEO HEO to only 45 employees should be troubling to any objective observer.
Clearly, it is impossible for 45 employees to effectively oversee Fannie Mae and Freddie Mac, whose combined assets exceed $1 trillon.... the Office of Thrift Supervision has over 2,500 employees to oversee institutions with an asset base of $800 billion and the Comptroller of the Currency has over 3,600 supervising institutions with a $2 trillion asset base.
Aida Alvarez, the newly appointed director of OFHEO, has already expressed her concern that this congressionally limited level of staffing will be insufficient. Having shortchanged this new agency, members should not be surprised when we later learn of delays in developing and implementing the required risk-based capital standards....
Degrees of Expedience
It may not be politically expedient to irritate Fannie Mae and Freddie Mac by subjecting them to agressive financial scrutiny, and assessing them for the cost of such oversight. It also may not be politically expedient to support the hiring of more Federal employees at a time when there is such a hue and cry from all quarters to cut the size of government.
But let me remind all my colleagues that, if either of these two corporations ever gets into financial trouble and requires special assistance, it certainly won't be politically expedient to vote for the bailout that will inevitably occur....
At such time as ... Director Alvarez determines additional staff is needed, I hope hat we we will fully support her request...
Somebody, somewhere ought to ride herd on Fannie Mae and Freddie Mac, good agencies but agencies which must have proper capital standards.