The term "systemic risk" has come a long way. Several years ago it was the "s-word" in congressional hearings. Today, it is de rigueur. Back then, I testified that Fannie Mae and Freddie Mac posed serious systemic risks to the U.S. and global economy. This observation was not popular.

I also stated that, as the safety and soundness regulator of those institutions, my agency had a responsibility to reduce the systemic risk that Fannie Mae and Freddie Mac posed to the financial markets but that we needed more tools to do so. In particular, as I testified repeatedly, they did not have enough capital — not nearly enough.

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