ICBA: GSE disclosures key, but conservatorship must be addressed

ICBA said that while it supports robust financial disclosures for Fannie Mae and Freddie Mac, it is concerned that the government-sponsored enterprises seem to be in a perpetual conservatorship.

Background: The Federal Housing Finance Agency is proposing GSE disclosures associated with regulatory capital instruments and risk-weighted assets calculated under the Enterprise Regulatory Capital Framework. The requirements are designed to encourage market discipline among the GSEs while allowing stakeholders to assess their overall risk profile.

Comments: In a comment letter to the FHFA, ICBA said the disclosures—like those that large banks are required to provide under Basel III—would support GSE safety and soundness as well as implementation of the capital framework. However, ICBA also expressed concerns that:

• The administration and FHFA have provided little information about the GSEs’ eventual exit from conservatorship.

• The disclosures would be costly and their utility would be largely unrealized until Treasury restores private shareholder ownership.

• Permanent conservatorship would harm the housing market, so FHFA and Treasury should modify the Preferred Stock Purchase Agreements, resolve the liquidation preference, and set a realistic timeline for an exit from conservatorship.