WASHINGTON -The Office of Federal Housing Enterprise Oversight announced plans Tuesday to assess the systemic risks the giant government sponsored enterprises - Fannie Mae and Freddie Mac -pose to the financial system.

"We must understand not just the risks faced by the enterprises, but also the risks they pose to the financial system," according to the text of a speech agency Director Armando Falcon Jr. made before the Eastern Secondary Mortgage Conference in Charlotte, N.C. A copy of the speech was released here. "The rapid growth of the enterprises' outstanding debt and mortgage securities has increased concernsÂ…

"Systemic risks have the potential to cause a widespread crisis in the financial system - a distrubance that severely limits the flow of credit, payments, or the pricing of financial assets."

Mr. Falcon noted that banks and thrifts are hold Fannie and Freddie debt "in amounts that are large relative to their capital. Ofheo will solicit comments on the key questions the study will cover including "the potential benefits and costs of options for limiting systemic risk posed by the enterprises," he said.

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