Skip navigation


Current DateTime: 12:45:26 08 Nov 2009
LinksList Documentid: 24355697

Current DateTime: 12:45:26 08 Nov 2009
LinksList Documentid: 24890560
  • Winterizing Your Portfolio

      If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.

  • Investor's Guide to Real Estate

      Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.

  • Alternative Investing

      Stocks and bonds? Sure. But it's a big world out there for investors.

powered by digg
Fannie, Freddie Adequately Capitalized: Lockhart
By: CNBC.com with Wires | 08 Jul 2008 | 11:36 AM ET
Text Size

Mortgage financiers Fannie Mae and Freddie Mac are adequately capitalized and continue to be active in the mortgage market, said James Lockhart, director of the Office of Federal Housing Enterprise, which regulates the two enterprises.

AP

"Both of these companies are adequately capitalized, which is our highest criteria," Lockhart said in an interview with CNBC. "They have been very active in the mortgage market, and they are continuing to be. And, in fact, Congress has put on them the requirement to do jumbo mortgages and they have been doing those as well."

Lockhart also said OFHEO is working with the Financial Accounting Standards Board, or FASB, on the revision of rule FAS 140, an accounting rule that raised concerns about Fannie and Freddie's capital needs and sparked a steep sell off of their shares on Monday.

Lockhart said the proposed accounting change should not dictate their capital requirements.

Lockhart's comments soothed rattled nerves and helped Fannie Mae [FNM  Loading...      ()   ] and Freddie Mac [FRE  Loading...      ()   ] shares rebound early Tuesday. However, by late morning, the stock were trading mixed.

Accounting rulemakers are considering changing a rule that could force companies to account for securitized assets, such as mortgage-backed securities, on their balance sheets.

Taken literally, it could mean Fannie Mae and Freddie Mac would need a combined $75 billion in additional capital, according to a Lehman Brothers research note published Monday.

"I have to tell you, an accounting change should not drive a capital change," Lockhart told CNBC.

Statements on the possible impact of the accounting rule by Lehman and other analysts on Monday struck a raw nerve for investors already concerned the ailing housing market would create greater-than-expected losses for the government-sponsored enterprises (GSEs).

The GSEs have raised billions of dollars in capital to run their businesses and offset more than $12 billion in combined losses since June. Both have said they do not expect improvement in housing until 2009.

Meanwhile, their equity investors have lost a collective $89 billion as their stock market values have tanked since the crisis erupted last August -- $36.9 billion for Freddie and $52.1 billion for Fannie. Monday's selloff alone pushed shares of the two stocks to their lowest levels in nearly 16 years.

Lockhart stressed Tuesday that Fannie Mae and Freddie Mac "are playing a critical role in this mortgage market" and that their support for housing must be balanced with their ability to make money for shareholders.

Analysts expect the companies will have to raise more capital with common stock, diluting the value of existing shares.

That speculation has been exacerbated by regulators and lawmakers who have pressuring the companies to raise capital for use in stabilizing the housing market that has worsened the U.S. economic slowdown.

"You have to make sure these firms have adequate returns for their shareholders so they can continue to raise capital," Lockhart said. 

--Reuters and AP contributed to this report.

© 2009 CNBC.com
Tools:
Print EmailAdd This share icon
  • digg share

CNBC HIGHLIGHTS

  • Rumors abound that Oprah will leave her show to start a new network. What would this mean for daytime TV?
  • David Moore
  • A private equity specialist sponsored a stand-up comedy troupe in New York to prove that CEOs can, in fact, be funny.
  • Jim Cramer
  • Cramer did the research and found eight stocks that lead the pack. Read on to get his top picks.
  • Hideki Matsui
  • Did Hideki Matsui’s performance make it more likely that the Yankees will pay to have him back?
  • Which wines should you bring—or serve—with holiday meals this year? Ask a connoisseur.
  • Two competitors in this year’s World Series of Poker in Las Vegas have stories fit for Hollywood.
ADD COMMENTS
Remaining characters


Current DateTime: 02:09:27 08 Nov 2009
LinksList Documentid: 29778428

Current DateTime: 02:09:27 08 Nov 2009
LinksList Documentid: 29779196

Current DateTime: 02:09:27 08 Nov 2009
LinksList Documentid: 29779199

Current DateTime: 02:09:27 08 Nov 2009
LinksList Documentid: 29779198
  Data is a real-time snapshot  *Data is delayed at least 15 minutes
Global Business and Financial News, Stock Quotes, and Market Data and Analysis

© 2009 CNBC, Inc.  All Rights Reserved.
A Division of NBC Universal
Thomson ReutersThomson Reuters