Government-Sponsored Enterprises: A Framework for Strengthening
GSE Governance and Oversight (10-FEB-04, GAO-04-269T).
Congress established government sponsored enterprises (GSE)--
such as Fannie Mae, Freddie Mac, the FHLBank System, and the Farm
Credit System--to facilitate the development of mortgage and
agricultural lending in the United States. Although the federal
government does not explicitly guarantee the GSEs' approximately
$4.4 trillion in financial obligations, the potential exists that
the government would provide financial assistance in an emergency
as it has done in the past. Recent financial reporting problems
at Freddie Mac have raised concerns about the quality of the
GSEs' corporate governance and regulatory oversight. To assist
Congress in reviewing the adequacy of GSE oversight, this
testimony provides information on GSE corporate governance,
regulatory oversight, and mission compliance measures.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-269T
ACCNO: A09234
TITLE: Government-Sponsored Enterprises: A Framework for
Strengthening GSE Governance and Oversight
DATE: 02/10/2004
SUBJECT: Agency missions
Financial management
Government sponsored enterprises
Internal controls
Risk management
Strategic planning
Accountability
Securities
Congressional oversight
******************************************************************
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GAO-04-269T
United States General Accounting Office
GAO Testimony
Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate
For Release on Delivery
Expected at 10:00 a.m. EST
Tuesday, February 10, 2004 GOVERNMENT-SPONSORED
ENTERPRISES
A Framework for Strengthening GSE Governance and Oversight
Statement of David M. Walker Comptroller General of the United States
GAO-04-269T
Highlights of GAO-04-269T, a testimony before the Committee on Banking,
Housing, and Urban Affairs, U.S. Senate
Congress established government sponsored enterprises (GSE)- such as
Fannie Mae, Freddie Mac, the FHLBank System, and the Farm Credit System-to
facilitate the development of mortgage and agricultural lending in the
United States. Although the federal government does not explicitly
guarantee the GSEs' approximately $4.4 trillion in financial obligations,
the potential exists that the government would provide financial
assistance in an emergency as it has done in the past. Recent financial
reporting problems at Freddie Mac have raised concerns about the quality
of the GSEs' corporate governance and regulatory oversight.
To assist Congress in reviewing the adequacy of GSE oversight, this
testimony provides information on GSE corporate governance, regulatory
oversight, and mission compliance measures.
GAO recommends several steps that GSEs, regulators, and Congress can take
to strengthen GSE oversight. These steps include strengthening GSE
corporate governance, creating a single housing GSE regulator, and
establishing standards to measure GSE mission compliance.
www.gao.gov/cgi-bin/getrpt?GAO-04-269T.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Thomas J. McCool at (202)
512-8678 or [email protected].
Tuesday, February 10, 2004
GOVERNMENT-SPONSORED ENTERPRISES
A Framework for Strengthening GSE Governance and Oversight
GSEs should lead by example in connection with governance, accountability,
integrity, and public trust issues. GSEs should strive to achieve model
corporate governance structure, provide reasonable transparency of
financial and performance activities, and adopt compensation arrangements
that focus on both long-term and short-term results. However, GSE
corporate governance has not always reflected best practices. For example,
currently, the Chief Executive Officers (CEO) of Freddie Mac and Fannie
Mae also serve as the chairmen of their respective GSE boards, which is
not consistent with model governance standards that call for officers to
work for an independent board. GAO notes that as part of its regulatory
agreement, Freddie Mac has agreed to separate the position of CEO and the
position of chairman within a reasonable period of time. However, Fannie
Mae has yet to take this step. With respect to compensation arrangements,
Freddie Mac's focus on short-term financial results as performance targets
appears to have contributed to the GSE's recent financial reporting
problems.
GSE regulators must be capable, credible, strong, and independent.
However, the regulatory structure for the housing GSEs-Fannie Mae, Freddie
Mac, and the FHLBank System-is fragmented with safety and soundness and
mission oversight responsibilities divided among three regulators. A
single housing GSE regulator offers many advantages over this fragmented
structure including prominence in government, the sharing of technical
expertise, and the ability to assess trade-offs between safety and
soundness considerations and certain mission compliance activities, such
as affordable housing initiatives. Although there are advantages of a
single director model for the new housing GSE regulator, GAO believes on
balance that a board or a hybrid board and director might make the most
sense to oversee the GSEs' safety and soundness and mission oversight. To
be effective, the single GSE regulator must also have all the regulatory
oversight and enforcement powers necessary to carry out its critical
responsibilities.
Because of a lack of clear measures, it is difficult for Congress,
accountability organizations, and the public to determine whether the
benefits provided by the GSEs' activities are in the public interest and
outweigh their financial risks. Available evidence and data indicate that
the housing GSEs have made, in some cases, progress in benefiting
homebuyers. For example, it is generally agreed that Fannie Mae and
Freddie Mac's activities have lowered mortgage interest rates, although
there is debate over the degree of these benefits. However, it is not
clear that the housing GSEs' large holdings of mortgage-backed securities
benefit borrowers. There is also limited information as to the extent to
which the FHLBank System's more than $500 billion in outstanding loans to
financial institutions have facilitated mortgage lending.
Mr. Chairman, Mr. Ranking Member, and Members of the Committee:
I appreciate the opportunity to participate in today's hearing to discuss
oversight of the government-sponsored enterprises (GSE), namely Fannie
Mae, Freddie Mac, the Federal Home Loan Banks (FHLBanks), the Farm Credit
System (FCS), and the Federal Agricultural Mortgage Corporation (Farmer
Mac). I note that the GSEs had combined obligations, including
mortgage-backed securities (MBS) and other debt obligations, of $4.4
trillion as of September 30, 2003, and, as I will explain in detail later,
the potential exists that the federal government may choose to provide
financial assistance to the GSEs in an emergency. Accounting and financial
reporting problems related to earnings disclosed by Freddie Mac last year
have raised several concerns about the company's management and board of
directors as well as the effectiveness of regulatory oversight that is
designed to protect taxpayers from the risks associated with the GSEs.
Recently reported investment losses at the FHLBanks have also served to
raise public concerns regarding the well-being of GSEs. These events
prompted Congress to consider the need for meaningful reforms to help
strengthen the oversight of GSEs. In my view, our past experience in the
savings and loan industry, the recent accountability breakdowns in the
private sector, and the importance of gaining public trust for regulatory
agencies that oversee our financial institutions and our capital markets
is directly relevant to the ongoing debate on appropriate regulatory
oversight of GSEs.
It is clear that many parties have different views on what needs to be
fixed and how to do it. My comments today are intended to frame GSE
oversight issues broadly and provide our views on some of the questions
and options that must be addressed to better oversee the GSEs going
forward. Although my comments will largely focus on the housing
GSEs-Fannie Mae, Freddie Mac, and the FHLBank System--given the themes of
our discussion today, I will also use examples from the other GSEs to
illustrate my points. We look forward to working with Congress to provide
assistance in defining these issues, exploring various options, and
identifying their implications in order to address any weaknesses that
could serve to threaten confidence in our financial markets and that
inhibit improvements in the current regulatory structure.
My testimony today is divided into two sections. In the first part, I will
provide an overview of the GSEs and their missions, discuss the risks they
pose to taxpayers and financial markets, and then I will lay out
principles to help ensure effective governance and oversight of the GSEs.
Second, I
will provide our views regarding the extent to which GSE governance and
oversight structures are consistent with these important principles.
In summary, to ensure that the GSEs operate in a safe and sound manner, it
is essential that effective governance, reasonable transparency, and
effective oversight systems are established and maintained. In particular,
the GSEs should lead by example in the area of corporate governance; GSE
regulators must be strong, independent, and have necessary expertise; and
GSE mission definitions and benefit measures need to be established.
However, our work found that GSE corporate governance does not always
reflect best practices; for example, Fannie Mae's Chief Executive Officer
(CEO) serves as chairman and its Chief Operating Officer (COO) and Chief
Financial Officer (CFO) both serve as vice chairmen of the board, which is
not consistent with model governance theory that calls for an independent
board and chair. I note that Freddie Mac's CEO is also the chairman of
that company's board but Freddie Mac has agreed to split these functions
in the future. Furthermore, the regulatory structure for the housing GSEs
is fragmented and serious questions exist as to the capacity of GSE
regulators to fulfill their responsibilities. In each of these areas, I
will summarize steps that Congress, GSEs, and regulators can take to
improve GSE governance and oversight. In particular, I believe that
Congress should establish a single housing GSE regulator that would be
governed by a board or a hybrid board and director and provided with the
authorities necessary to carry out its mission.
To prepare for this testimony, we relied heavily on a substantial amount
of work that we had done on GSEs and their regulatory oversight in the
past, but we also reviewed our historical positions in light of the
current regulatory structure and GSE activities. The attachment lists
reports representing this body of work. In addition to reviewing our past
work, we solicited views of officials from the Office of Federal Housing
Enterprises Oversight (OFHEO), the Department of Housing and Urban
Development (HUD), and the Federal Housing Finance Board (FHFB). We also
reviewed financial data on the GSEs, best practices standards for
corporate governance, and regulatory reports on such issues as the GSEs'
effects on financial market stability. We conducted our work in
Washington, D.C., between November 2003 and January 2004 in accordance
with generally accepted government auditing standards.
Overview of GSEs, I would like to begin by summarizing the roles and
responsibilities of the
GSEs, describing their potential risks to taxpayers and the financial
Their Risks, and markets, and offering certain principles on governance
and oversight to Principles for help ensure that the GSEs' activities are
safe, sound, and consistent with
their public missions.
Effective Governance and Oversight
What are the GSEs and How Do They Carry Out Their Missions?
Over the past century, Congress established GSEs to address concerns that
private financial institutions were not adequately meeting the credit
needs of homebuyers and agricultural interests (see table 1). The GSEs are
government-sponsored, privately owned and operated corporations whose
public missions are to enhance the availability of mortgage and
agricultural credit across the United States. It is also generally
understood that the housing GSEs' public missions include the obligation
to meet the needs of targeted groups of borrowers.1 The GSEs generally
carry out their missions by (1) borrowing funds in the capital markets and
purchasing assets from financial institutions or making loans to the
institutions or (2) securitizing assets and providing a credit guarantee
to security holders. These activities may provide mortgage or real estate
credit to homebuyers, businesses, or farmers at rates or conditions more
favorable than those that would be available in the absence of these GSEs.
It is important to note that the GSEs' debt and security offerings are not
explicitly guaranteed or insured by the U.S. government.
1Through legislation, Congress has required the housing GSEs to serve the
credit needs of targeted borrowers, such as low-income, urban, and rural
homeowners. For example, Fannie Mae and Freddie Mac are required to meet
housing goals established by HUD for the purchase of mortgages serving
targeted groups. The FHLBanks are also required to provide grants or below
market price advances for mortgages serving targeted groups through the
Affordable Housing Program.
Table 1: Overview Information on the GSEs as of September 30, 2003
Dollars in billions
GSE and year Financial
created obligations Structure Regulator
Fannie Mae For profit publicly
traded OFHEO - safety &
(1938) soundness
$2,187a HUD - mission
Freddie Mac For profit publicly
traded OFHEO - safety &
(1970) soundness
$1,388a HUD - mission
FHLBank 12 District Banks FHFB
System (1932) Member-owned
$716.9b cooperatives
FCS (1916) 5 banks and 99 Farm Credit
Associations Administration
Member-owned
$97.1c cooperatives
Farmer Mac For profit publicly Farm Credit
traded
(1987) Administration -
Office
of Secondary Market
$7.2d Oversight
Sources: OFHEO, FHLBank System Office of Finance, Federal Farm Credit
Banks Funding Corporation, and Farm Credit Administration (FCA).
aIncludes short-and long-term debt and MBS held by investors. Freddie Mac
data are as of December 31, 2002, and are subject to change as Freddie Mac
is currently restating its 2002, 2001, and possibly 2000 financial
statements.
bFHLBank System consolidated obligations.
cTotal liabilities, including securities, bonds, and other liabilities.
dOn-balance sheet liabilities and off-balance sheet liabilities, including
agricultural mortgage-backed securities (AMBS) held by investors.
Let me now briefly discuss the missions and activities of each of the
GSEs:
o Fannie Mae and Freddie Mac's mission is to enhance the availability of
mortgage credit across the nation during both good and bad economic times
by purchasing mortgages from lenders (banks, thrifts, and mortgage
lenders) that use the proceeds to make additional mortgages available to
homebuyers. Most mortgages purchased by Fannie Mae and Freddie Mac are
conventional mortgages, which have no federal insurance or guarantee. The
companies' mortgage purchases are subject to a conforming loan limit that
currently stands at $333,700 for a single-family home in most states.
Although Fannie Mae and Freddie Mac hold some mortgages in their
portfolios that they purchased, most
mortgages are placed in mortgage pools to support MBS. Fannie Mae and
Freddie Mac issued MBS are either sold to investors (off-balance sheet
obligations) or held in their retained portfolios (on-balance sheet
obligations). Fannie Mae and Freddie Mac guarantee the timely payment of
interest and principal on MBS that they issue.
o The 12 FHLBanks traditionally made loans-also known as advances- to
their members (typically banks or thrifts) to facilitate housing finance
and community economic development. FHLBank members are required to
collateralize advances with high quality assets such as single-family
mortgages. More recently, the FHLBanks initiated programs to purchase
mortgages directly from their members and hold them in their retained
portfolios. This process is similar to Fannie Mae and Freddie Mac's
traditional business activities, although the FHLBanks do not currently
have the authority to securitize mortgages.
o FCS, of which Farmer Mac is an independent institution, is a
nationwide network of borrower-owned financial institutions and
specialized service organizations. FCS consists of six Farm Credit Banks
and one Agricultural Credit Bank, which provide funding and affiliated
services to locally owned Farm Credit associations and numerous
cooperatives nationwide. Among other activities, FCS provides credit and
related services to farmers, ranchers, producers, and rural homeowners.
o Farmer Mac's mission is to provide for a secondary marketing
arrangement for agricultural real estate and rural housing loans subject
to its underwriting standards. Farmer Mac purchases mortgages directly
from lenders for cash and purchases bonds from agricultural lenders.
Farmer Mac securitizes mortgages and issues AMBS and, like Fannie Mae and
Freddie Mac, guarantees the timely payment of interest and principal on
these securities. Farmer Mac holds most of the AMBS that it issues in its
retained portfolio.
What are the Risks of the As a result of their activities, the GSEs'
outstanding debt and off-balance
GSEs? sheet financial obligations are large. The GSEs' financial
obligations were $4.4 trillion as of September 30, 2003. By comparison,
the U.S. Treasury had $6.8 trillion in total obligations for the same
date. The GSEs face the risk of losses primarily from credit risk,
interest rate risk, and operational
risks.2 Although the federal government explicitly does not guarantee the
obligations of the GSEs, it is generally assumed on Wall Street that
assistance would be provided in a financial emergency. In fact, during the
1980s the federal government provided financial assistance to both Fannie
Mae and FCS when they experienced difficulties due to sharply rising
interest rates and declining agricultural land values, respectively. The
potential exists that Congress and the Executive Branch would determine
that such assistance was again necessary in the event that one or more of
the GSEs experienced severe financial difficulties. Because the markets
perceive that there is an implied federal guarantee on the GSEs'
obligations, the GSEs are able to borrow at interest rates below that of
private corporations, which-as I discussed earlier-allows them to extend
credit to financial institutions at favorable rates.
The GSEs also pose potential risks to the stability of the U.S. financial
system. In particular, if Fannie Mae, Freddie Mac, or the FHLBank System
were unable to meet their financial obligations, other financial market
participants depending on payments from these GSEs, may in turn become
unable to meet their financial obligations. This risk, called systemic
risk, is often associated with the housing GSEs because of the sheer size
of their financial obligations. For example, as discussed in OFHEO's 2003
report on systemic risk, if either Fannie Mae or Freddie Mac were to
become insolvent, financial institutions holding the enterprise's MBS
could be put into a situation where they could no longer rely on those
securities as a ready source of liquidity.3 Depending on the response of
the federal government, the financial health of the banking segment of the
financial services industry could decline rapidly, possibly leading to a
decline in economic activity. As another example, derivatives
counterparties holding contracts with a financially troubled GSE could
realize large losses if the GSE were no longer able to meet its
obligations. If such a hypothetical event were to occur, widespread
defaults could occur in derivatives markets.
2Credit risk is the possibility of financial loss resulting from default
by homeowners on housing assets that have lost value; interest rate risk
is the risk of loss due to fluctuations in interest rates; and operational
risk includes the possibility of financial loss resulting from inadequate
or failed internal processes, people and systems, or from external events.
3Office of Federal Housing Enterprises Oversight. Systemic Risk: Fannie
Mae, Freddie Mac, and the Role of OFHEO. Washington, D.C: February 4,
2003.
How Can GSE Risks Be Mitigated?
The GSEs Should Lead by Example in Terms of Corporate Governance and
Accountability
To prevent the need for the federal government ever to have to provide
financial support to a GSE and to minimize the risks of financial
instability, it is critical to ensure that proper corporate governance,
reasonable transparency, and effective oversight systems are in place.
There are several lines of defense to ensure that GSEs' activities are
conducted in a safe and sound manner including management, boards of
directors, auditors, and regulators. As we have seen in recent private
sector instances such as Enron and Worldcom, these critical lines of
defense can and do fail. Consequently, the private sector, Congress, and
regulators have initiated actions-such as the passage and implementation
of the Sarbanes-Oxley Act-to ensure that the risk of such failures of
governance and oversight are minimized. In my view, it is all the more
important that strong safeguards are established for the GSEs because such
institutions are not subject to the same degree of market discipline as
other privately run businesses. As a result of the perception of an
implied guarantee of GSE obligations, customers and creditors may be less
willing to monitor the companies' risk-taking, which could encourage
managers to take on excessive risks.
I would now like to offer, on the basis of both my own experience and past
GAO work, several specific and pragmatic principles to ensure effective
GSE governance and oversight:
Not only should GSEs be sensitive to good governance but it is all the
more important they lead by example in connection with accountability,
integrity, and public trust. In particular, GSEs should strive to have a
truly independent board, compensation arrangements consistent with their
public mission and private shareholder obligations, and appropriate
transparency of their financial activities. Under model governance theory,
the board of directors works in the best interest of the shareholders and
the CEO works for the board. Board members should be independent and be
able to provide strategic advice to management in order to help maximize
shareholder value. The board should also help manage risk to shareholders
and have a clear responsibility to hold management accountable for results
both currently and over time. I note that in the context of the GSEs,
boards could also have a responsibility to ensure that the GSEs'
activities fulfill their public missions. In some cases, there can be a
tension between maximizing shareholder value and fulfilling public
missions. GSE boards and executives must have the requisite commitment and
talent to respond to this challenge.
To adhere to model governance theory, it is also important for the board
to ensure that overall executive compensation is aligned with
The GSEs Require a Strong, Independent, and Capable Regulatory System
achievements related to the company's long-term strategic objectives and
less on short-term accomplishments such as quarterly or annual earnings.
Further, it is not just the total amount of compensation but the form and
structure of executive compensation arrangements that is important as
well. Finally, transparency through timely and reliable financial and
performance information and reasonable disclosures is necessary to enable
capital markets and investors to understand related values and risks
associated with the GSEs. Market discipline works best when firms fully
and publicly disclose their financial obligations and activities.
A regulatory system of GSE oversight must have the necessary strength,
independence, and capability to protect against the significant risks and
potential costs to taxpayers posed by the GSEs. We have consistently
supported and continue to believe in the need for the creation of a single
regulator to oversee both safety and soundness and mission of the housing
GSEs, which, as I will describe later, are currently divided among OFHEO,
HUD, and FHFB.4 A single regulator could be more independent and objective
than separate regulatory bodies and could be more prominent than either
one alone. Although the housing GSEs operate differently, the risks they
manage and their missions are similar. We believe that valuable synergies
could be achieved and expertise in evaluating GSE risk management could be
shared more easily within one agency. In addition, we believe that a
single regulator would be better positioned to oversee the GSEs'
compliance with mission activities, such as special housing goals and any
new programs or initiatives any of the GSEs might undertake. This single
regulator should be better able to assess these activities' competitive
effects on all three housing GSEs and better able to ensure consistency of
regulation for GSEs that operate in similar markets.
Further, a single regulator would be better positioned to consider
potential trade-offs between mission requirements and safety and soundness
considerations, because such a regulator would develop a fuller
understanding of the operations of these large and complex financial
institutions. Some critics of combining safety and soundness and mission
have voiced concerns that doing so could create regulatory conflict for
the regulator. However, we believe that a healthy tension would be created
that could lead to improved oversight. The trade-offs between safety and
4See U.S. General Accounting Office, Government-Sponsored Enterprises:
Advantages and Disadvantages of Creating a Single Housing GSE Regulator,
GAO/GGD-97-139 (Washington, D.C.: July 9, 1997).
Measures Must Be Established to Help Ensure That the GSEs' Benefits
Outweigh the Financial Risks That Their Activities Pose to Taxpayers
The GSEs' Corporate Governance, Regulatory Oversight, and Mission Compliance
Reporting Can Be Strengthened
soundness and compliance with mission requirements could be best
understood and accounted for by having a single regulator that has
complete knowledge of the GSEs' financial condition, regulates the mission
goals Congress sets, and assesses efforts to fulfill them.
To be effective, the single regulator must have all the powers,
authorities, and technical expertise necessary to oversee the GSEs'
operations and compliance with their missions.
Without clearly defined measures of the GSEs' benefits, it is not possible
for Congress, accountability organizations, and the public to determine
whether the federal government should be subject to the financial risks
associated with the GSEs' activities. I acknowledge that developing such
measures may prove challenging for several reasons. First, isolating the
GSEs' effects on mortgage and agricultural credit markets is a complex and
technical undertaking. Second, the GSEs' financial activities have evolved
over the years and become increasingly sophisticated, which further
complicates any analysis of the GSEs' benefits and costs. Third, in some
cases, there is a lack of measurable mission-related criteria that would
allow for a meaningful assessment of the GSEs' mission achievement or
whether the GSEs' activities are consistent with their charters.
Nevertheless, past actions by Congress and regulators demonstrate that
developing such quantifiable measures is possible. For example, in 1992,
Congress required HUD to set numeric housing goals for Fannie Mae and
Freddie Mac to help ensure that their mortgage purchases served the needs
of low-income households as well as other targeted groups.
Now that I have laid out the risks associated with the GSEs and principles
for effective governance and oversight, I would like to turn my attention
to how the current system compares with those principles. While there is
some positive information to report about the GSEs, there are also
weaknesses in the areas of corporate governance, regulatory oversight, and
mission compliance reporting. In each of these areas, there are steps we
believe Congress, the regulators, or GSEs can take to address weaknesses
in GSE governance and oversight that we have identified.
GSE Corporate Governance Practices Can Be Improved
The GSEs' corporate governance practices are not fully consistent with the
principles that I previously mentioned. The first principle I discussed is
independence of the board and the role of the board of directors. There
are instances where the GSEs can further their efforts in ensuring board
independence. To illustrate:
o Like CEOs at many other publicly traded companies, the CEO of Fannie
Mae and the CEO of Freddie Mac currently serve as chairman of their
respective boards of directors. In addition, Fannie Mae's COO and CFO both
serve as vice chairmen of the board. All too frequently, such individuals
will have significant influence over who is asked to join the board and
who is asked to leave it. OFHEO, in its special examination of Freddie Mac
(OFHEO report), recommended that Freddie Mac should separate the functions
of the CEO and the board chairman to improve the effectiveness of the
board of directors and Freddie Mac has agreed to do so.5 I also note that
OFHEO recently submitted
proposed corporate governance reforms to the Office of Management and
Budget that would require the GSEs to separate the CEO and chair
positions; and
o A recent FHFB study on board governance of the FHLBanks found that the
selection process for board and committee chairpersons and assignment of
committee memberships at some FHLBanks lacked transparency or
inclusiveness.6 The study concluded that committee
selection processes relying on only one person or the recommendations of
senior management may diminish the independence of directors. FHFB
recommended the FHLBanks strengthen their boards of directors by using a
transparent and inclusive selection process.
In practice, GSE boards may face difficulties in complying with modern
governance standards because of statutory and regulatory requirements
regarding the structure, selection, and composition of such boards. For
example,
o Fannie Mae and Freddie Mac's boards include five seats that are
appointed annually by the President, serve one-year terms, and
5Office of Federal Housing Enterprises Oversight. Report of the Special
Examination of Freddie Mac. December 2003.
6Federal Housing Finance Board. Report of the Horizontal Review of Board
Governance of the Federal Home Loan Banks. June 2003.
represent various interests including the real estate industry, the
mortgage lending industry, and consumer interests.7 Treasury has proposed
eliminating the presidentially appointed directors at Fannie Mae and
Freddie Mac because the perceived roles of these directors contradict best
practices of corporate governance.8 OFHEO agrees with Treasury's position
because it has found that the appointed members do not play meaningful
roles on the GSEs' boards. While there may be reasons to eliminate these
positions, should Congress decide to retain them, it should consider (1)
lengthening the terms of the appointed directors so that they have
sufficient time to understand the GSEs' complex activities, (2)
establishing criteria to ensure that qualified individuals serve on the
boards who have expertise in financial activities and understand the GSEs'
mission responsibilities, and (3) establishing fiduciary responsibilities
to serve the special public purpose of the GSE.
o I would also like to point out that FHFB appoints at least 6
directors, known as public interest directors, to serve on the board of
the FHLBanks, whose boards each consist of at least 14 members. We believe
that a selection process that uses a regulator to select the directors of
the regulated entities could jeopardize the independence of those
directors as well as FHFB.
o As another example, our recent study of Farmer Mac provides an
illustration of how congressionally established board structure can
complicate a GSE's compliance with board independence requirements. We
noted that the statutory structure of the Farmer Mac board requires a
majority of the directors to come from institutions that utilize Farmer
Mac's services.9 This raises questions as to the
independence of that board.
7As specified in their charters, Fannie Mae and Freddie Mac each have
18-member boards of directors. The President appoints 5 of the directors
at each company, while shareholders elect the other 13. Board members are
elected or appointed to 1-year terms.
8Testimony of Secretary John W. Snow Before the U.S. Senate Committee on
Banking, Housing and Urban Affairs. Washington, D.C.: October 16, 2003. He
stated that "...The Administration is committed to make sure that
corporate governance ... remain strong and effective. That requires that
there be great clarity that the people running large companies are there
to serve the interests of the shareholders and that their incentives and
loyalties be clearly aligned in this way."
9U.S. General Accounting Office, Farmer Mac: Some Progress Made, but
Greater Attention to Risk Management, Mission, and Corporate Governance Is
Needed. GAO-04-116 (Washington, D.C.: Oct 16, 2003).
In the area of compensation, there are indications that the structure of
executive compensation arrangements and the process of determining
compensation levels at the GSEs are not in line with best practices for
corporate governance. As examples,
o According to the OFHEO report, approximately 54 percent of the total
cash compensation (salaries, bonuses, and other compensation) paid by
Freddie Mac to executive officers for performance in 2001 was based on
corporate performance for that year. The study found that the compensation
of senior executives, in particular, the size of the bonus pool, was tied,
in part, to meeting or exceeding annual specified earnings per share
targets. OFHEO concluded that the importance of achieving such targets
contributed, in part, to the improper accounting and management practices
of the GSE. As such, OFHEO recommended that Freddie Mac should develop
financial incentives for executives and employees based on long-term
goals.
o Our study at Farmer Mac also identified an aggressive stock option
vesting plan whereby stock options for employees and directors were fully
vested within 2 years. By comparison, companies have average vesting
periods of 4 to 5 years. Farmer Mac has since changed its vesting program
to be more aligned with those of other companies.
Finally, in my view, adequate transparency is important because the
housing GSEs engage in complex transactions, such as securitizations,
guarantees, and hedging of risk which introduce many financial reporting
complexities. With the exception of Farmer Mac, GSEs are exempt from the
securities laws, and are not required to file disclosure documents with
the Securities Exchange Commission (SEC) with respect to their securities
issuances. Nevertheless, in October 2000, Fannie Mae and Freddie Mac
adopted six voluntary commitments aimed at increasing their financial
disclosures. More recently, Fannie Mae has registered its stock with SEC
on a voluntary basis and Freddie Mac has stated its intention to do the
same. Although financial disclosure may improve transparency, its impact
on the GSEs and their customers or funding parties may be limited if the
GSEs are perceived to have implicit government backing. For this reason,
while market discipline can play a role in curbing risky behavior by GSEs,
it also has its limitations. Effective oversight thus takes on more
importance as a means for limiting inappropriate risk-taking behavior by
the GSEs. Now let me move on to the last line of defense, that is,
oversight by regulators.
Housing GSE Regulatory Structure Does Not Ensure Effective Oversight
GSE Regulatory Structure Can Be Consolidated
Unfortunately, the current housing GSE regulatory structure is fragmented,
which limits the federal government's ability to oversee the GSE's
activities. Congress now has the opportunity to rationalize the current
GSE regulatory structure through the creation of a single regulator that
would oversee the housing GSEs' safety and soundness and mission
activities. Congress should also ensure that the new GSE regulator has the
authorities necessary to carry out its critical responsibilities.
Although the housing GSEs share similar risks and missions, there are
three regulators overseeing either their safety and soundness, their
missions, or both. Currently, OFHEO regulates Fannie Mae and Freddie Mac
on matters of safety and soundness, while HUD is the mission regulator.
FHFB serves as the safety and soundness and mission regulator of the
FHLBanks. Available evidence raises questions about the capacity of the
current regulatory structure to effectively monitor the GSEs' safety and
soundness and mission compliance. To illustrate:
o OFHEO did not identify the substantial financial accounting problems
at Freddie Mac at an early stage. In fact, OFHEO's 2001 and 2002
examinations of Freddie Mac gave high marks to the GSE in such relevant
areas as corporate governance and internal controls, despite the
widespread deficiencies later identified in these areas. OFHEO's current
director has stated that the agency plans to strengthen its examination
program, create an office of the chief accountant, and elevate the
important area of corporate accounting into its oversight process.
o As of July 2002, FHFB employed just 10 examiners to review the
increased risks and complexity of the 12 FHLBanks and the agency's reviews
of key activities-such as internal controls-were limited.10
Although FHFB has initiated a program to triple the number of
examiners to 30 by the end of FY 2004 and has revised its examination
program, it is too soon to judge the effectiveness of FHFB's
initiatives.11
For example, as FHFB continues the process of developing a sufficient and
capable force of examiners, it must cope with the fact that several
FHLBanks reported losses or weak financial results in late FY 2003 and
10The FHLBanks direct mortgage purchase programs expose the banks to
interest rate risk and increasingly sophisticated strategies-such as the
use of derivatives and hedging techniques-are necessary to manage these
risks.
11By late 2003, FHFB had a staff of 22 examination professionals,
according to FHFB officials.
some FHLBanks continue to expand their mortgage purchase programs.
o HUD officials we contacted said that the department lacks sufficient
staff and resources necessary to carry out its GSE mission oversight
responsibilities. HUD officials said that although the GSEs' assets have
increased nearly six-fold since 1992, HUD's staffing has declined by 4,200
positions and GSE oversight-which now consists of about 13 full-time
positions-must compete with other department priorities for the limited
resources available. The President's 2005 budget includes a proposal that
would allow HUD to assess Fannie Mae and Freddie Mac for the cost of its
mission oversight.12 I also note that HUD (1) has not
proposed a rule to ensure that the GSEs' nonmortgage investments (such as
long-term corporate debt) are consistent with their housing mission as the
department committed to do in response to a 1998 GAO report and (2) it is
not clear that HUD has the expertise necessary to review sophisticated
financial products and issues, which are associated with nonmortgage
investments and new program applications.13
As I stated previously, a single GSE regulator offers many advantages over
the fragmented structure that exists today including prominence in
government, the sharing of technical expertise, and the ability to assess
trade-offs between safety and soundness considerations and certain mission
compliance activities.
In determining the appropriate structure for a new GSE regulator, we note
that Congress has authorized two different structures for governing
financial regulatory agencies: a single director and board. Among
financial regulators, single directors head the Office of the Comptroller
of the Currency (OCC), the Office of Thrift Supervision (OTS) and OFHEO
while boards or commissions run FHFB, SEC, and the Board of Governors of
the Federal Reserve System, among others. The single director model has
advantages over a board or commission; for example, the director can make
decisions without the potential hindrance of having to consult with or
obtain the approval of other board members.
12HUD's GSE mission oversight expenses are funded through the
appropriations process.
13U.S. General Accounting Office, Government Sponsored Enterprises:
Federal Oversight Needed for Nonmortgage Investments, GAO/GGD-98-48
(Washington, D.C.: March 11, 1998).
In our previous work, however, we have stated that a "stand-alone" agency
with a board of directors would better ensure the independence and
prominence of the regulator and allow it to act independently of the
influence of the housing GSEs, which are large and politically
influential. A governing board may offer the advantage of allowing
different perspectives, providing stability, and bringing prestige to the
regulator. Moreover, if the board included the secretaries of Treasury and
HUD or their designees, the potential exists that safety and soundness and
housing mission compliance concerns would both be represented. We are
mindful, though, based on recently completed work, of some of the
disadvantages of a stand-alone agency with a board of directors that is
divided along party lines.14 Tensions and conflicts between board members
potentially diminish some of these benefits.
I would note that in other regulatory sectors-besides financial
regulation-Congress has established alternative board structures that
could be considered as potential models for the new GSE regulator. One
such alternative structure would be to have a presidentially appointed and
Senate confirmed director, and a board of directors comprised of the
secretaries from relevant executive branch agencies, such as Treasury and
HUD. Board members being from the same political party could lessen some
of the tensions and conflicts observed at boards purposefully structured
to have a split in membership along party lines. A board comprised of
members all from the same political party may, though, not benefit from
different perspectives to the same extent as a board with members from
different political parties. Therefore, an advisory committee to the
regulator could be formed, to include representatives of financial
markets, housing, and the general public. This advisory committee could
also be required to have some reasonable representation from different
political parties.
I would now like to comment on issues surrounding the potential funding
arrangements for a new housing GSE regulator. Similar to FHFB, OCC, and
OTS, OFHEO funds its operations through assessments on its regulated
entities, Fannie Mae and Freddie Mac. However, unlike these agencies that
are exempt from the appropriations process, OFHEO can only collect the
assessments when approved by an appropriations bill and
14See U.S. General Accounting Office, Financial Regulation: Review of
Selected Operations of the Federal Housing Finance Board, GAO-03-364
(Washington, D.C.: Feb. 28, 2003).
Congress Should Ensure That the New Housing GSE Regulator Has Adequate
Enforcement Authorities
at a level set by its appropriators. While testifying on GSE regulatory
reform, the director of OFHEO noted that the appropriations process has
placed severe constraint on OFHEO's operations and has hindered its
ability to hire additional resources it needs to strengthen its
oversight.15
Exempting the new GSE regulator from the appropriations process would
provide the agency the financial independence necessary to carry out its
responsibilities. More importantly, without the timing constraints of the
appropriations process, the regulator could more quickly respond to
budgetary needs created by any crisis at the GSEs. However, being outside
the appropriations process can create trade-offs. First, while the
regulator will have more control over its own budget and funding level, it
will lose the checks and balances provided by the federal budget and
appropriations processes or the potential reliance on increased
appropriations during revenue shortfalls. As a result, the regulator would
need to establish a system of budgetary controls to ensure fiscal
restraint. Second, removing the regulator from the appropriations process
could diminish congressional oversight of the agency's operations. This
trade-off could be mitigated through increased oversight by the
regulator's congressional authorizing committees, such as a process of
regular congressional hearings on the new GSE regulator's operations and
activities.
The new GSE regulator must have adequate powers and authorities to address
unsafe and unsound practices, respond to financial emergencies, and ensure
that the GSEs comply with their public missions. In our previous work, we
have stated that each GSE housing regulator administers its own statutory
scheme and these schemes contain various types of powers and authorities,
which although similar, are not identical.16 Further, the GSE housing
regulators' powers and authorities differ from that of banking regulators
in key areas. The following describes some of
15Statement of the Honorable Armando Falcon, Jr., Director of OFHEO before
the House Financial Services Subcommittee on Capital Markets, Insurance
and Government Sponsored Enterprises Hearing on The Office of Federal
Housing Enterprise Oversight's December Report of the Special Examination
of Freddie Mac. Washington, D.C.: January 21, 2004.
16See U.S. General Accounting Office, Comparison of Financial Institution
Regulators' Enforcement and Prompt Corrective Action Authorities,
GAO-01-322R (Washington, D.C.: Jan. 31, 2001).
these differences, which Congress may wish to consider in determining the
appropriate authorities for a new GSE housing regulator:
o Unlike bank regulators and FHFB, OFHEO's (1) authority to issue Cease
and Desist Orders does not specifically list an unsafe and unsound
practice as grounds for issuance and (2) powers do not include the same
direct removal and prohibition authorities applicable to officers and
directors;
o Bank regulators have prompt corrective authorities that are arguably
more robust and proactive than those of OFHEO and FHFB. These authorities
require that bank regulators take specific supervisory actions when bank
capital levels fall to specific levels or provide the regulators with the
option of taking other actions when other specified unsafe and unsound
actions occur.17 Although OFHEO has statutory authority to take certain
actions when Fannie Mae or Freddie Mac capital falls to predetermined
levels, the authorities are not as proactive or broad as those of the bank
regulators.18 OFHEO has also established regulations requiring specified
supervisory actions when unsafe developments are identified that do not
include capital, but OFHEO's statute does not specifically mention these
actions. FHFB's statute does not establish prompt corrective action
scheme, but FHFB officials believe they have all the authority necessary
to carry out their safety and soundness responsibilities; and
o Unlike bank regulators--which can place insolvent banks into
receivership--and FHFB, which can take actions to liquidate an FHLBank,
OFHEO is limited to placing Fannie Mae or Freddie Mac into a
conservatorship.19 I note that should Congress decide to grant the
17Capital can be a lagging indicator of unsafe and unsound conditions at
financial institutions. Declining asset quality is an unsafe and unsound
condition that may be identified months or years before capital declines.
18For example, bank regulators are required to take specified regulatory
actions at earlier stages of capital depletion than is OFHEO. Bank
regulators are also required to initiate four supervisory actions if an
institution is undercapitalized-including restricting asset growth-while
OFHEO is mandated to take only two actions (not including restricting
asset growth).
19According to OFHEO officials, a receivership is empowered to take over
the assets and operate an entity, assuming all of its powers and
conducting all of its business as well as removing officers and directors.
A receiver may place the failed institution into liquidation and sell its
assets. While a conservator may also remove officers and directors of an
entity, a conservator is typically appointed to conserve rather than
dispose of assets.
new GSE regulator receivership authority, it should task the regulator to
develop rules and procedures that would reduce the adverse impacts that a
GSE liquidation could have on housing finance and the stability of
financial markets.
In summary, I believe Congress can review the regulatory authorities at
OFHEO, FHFB, and bank regulators and, where appropriate, ensure that the
new regulator has sufficient authorities to carry out its critical
responsibilities.
Measures Have Not Been Established to Determine Whether the GSEs' Benefits
Outweigh Their Risks
In important cases, it is clear that the GSEs have fulfilled the public
missions for which they were initially created. Since the establishment of
Fannie Mae and the FHLBank System in the 1930s, for example, the nation's
mortgage finance market has progressed from a regionally based system
characterized by periodic credit shortages to a nationwide and liquid
system. Furthermore, it is generally agreed that Fannie Mae and Freddie
Mac's mortgage purchase activities have lowered the interest rates on
qualifying mortgages below what they otherwise would be. In a 1996 report,
we estimated that Fannie Mae and Freddie Mac's activities lowered the rate
on qualifying mortgages by about 15 to 35 basis points or a monthly
savings of between $10 and $25 on a typical mortgage of $100,000.20
Subsequently, federal agencies and researchers, academics, and the GSEs
have initiated studies that have estimated the extent of the benefits
provided by the GSEs' activities and the recipients of such benefits
(i.e., homebuyers vs. investors and management), which have reached
differing conclusions. Additional studies may be needed to more precisely
estimate the extent to which the GSEs' activities benefit homebuyers.
In other areas, however, there is substantially greater uncertainty
regarding the benefits of the GSEs' activities and more research is needed
to clarify these issues. Although the GSEs have expanded rapidly and
become more complex in recent years, for example, it is not always clear
how the GSEs' growth and complexity have enhanced their public missions.
For instance, at year-end 2002, Fannie Mae and Freddie Mac held a combined
$1.4 trillion of mortgage assets in their retained portfolios, including
MBS, while the FHLBanks hold about a combined $100 billion of
20U.S. General Accounting Office, Housing Enterprises: Potential Impacts
of Severing Government Sponsorship, GAO/GGD-96-120 (Washington, D.C.: May
13, 1996).
MBS. Although holding mortgage assets in their portfolios may enhance the
profitability of the GSEs, it also exposes them to interest rate risk,
which requires the use of sophisticated financial strategies-such as the
use of hedging which includes the use of derivatives-to manage
effectively. In addition, derivatives may also be used by financial
institutions to take positions on interest rate movements, which can
enhance their profitability but which is also inherently risky. Over the
years, questions have been raised as to whether the GSEs' portfolio
investments in MBS generate benefits to borrowers.
Additionally, the lines that initially existed between Fannie Mae and
Freddie Mac on the one hand and the FHLBank System on the other have
blurred. In addition to making advances to their members, for example,
FHLBanks have now purchased about $108 billion in mortgages directly from
their members, which is essentially Fannie Mae and Freddie Mac's
traditional business. Although the FHLBanks' mortgage purchases may
enhance competition in the market for secondary mortgage purchases, they
can just as easily raise questions as to whether there is a need for an
additional GSE performing essentially the same mission and incurring
similar risks.
In some cases, the absence of specific criteria and guidance complicates
efforts to assess the benefits of the GSEs' activities. Our recent work
concluded that Farmer Mac's statute contains broad mission purpose
statements and lacks specific or measurable criteria that would help
determine whether the GSE is meeting its policy goals. Farmer Mac's
nonmission-related assets-such as long-term corporate bonds-declined from
66 percent of assets in 1997 to 37 percent in 2002. However, the
composition and criteria for nonmission investments could potentially lead
to investments that are excessive in relation to Farmer Mac's financial
operating needs or otherwise would be inappropriate to the statutory
purpose of Farmer Mac. We suggested that Congress should consider
establishing clearer mission goals for Farmer Mac with respect to the
agricultural and real estate market to allow a determination as to whether
Farmer Mac had achieved its public policy goals.
Finally, I would also like to point out that there are other limitations
in the evidence and research on the benefits provided by the GSEs'
activities. The following are some examples that we have identified:
o There is limited information as to the extent to which the FHLBank
System's more than $500 billion in outstanding advances, as of midyear
2003, have facilitated mortgage availability. Although anecdotal
information is available on the benefits of FHLBank advances, studies
using quantitative analysis to assess the impacts of FHLBank advances on
housing and community development have not been produced.
o There is limited information available on the extent to which Fannie
Mae and Freddie Mac's investments in nonmortgage assets-such as long-term
corporate bonds-serve their public missions. As I described earlier, HUD
has not acted on its general regulatory authority to review the
appropriateness of the GSEs' nonmortgage investments as it committed to do
in response to a 1998 GAO report. Given that HUD has not acted in this
area for the past 6 years, we again recommend that Congress legislate
nonmortgage investment criteria for HUD or any new GSE regulator that may
be established through legislation.
o There is virtually no information available as to whether Farmer Mac's
activities have benefited agricultural real estate markets. For example,
the depth and liquidity of the demand for AMBS in the current market is
unknown.
Without quantifiable measures and reliable data, Congress and the public
cannot judge the effectiveness of the GSEs in meeting their missions or
whether the benefits provided by the GSEs' various activities are in the
public interest and outweigh their financial risks. To improve the quality
of information about the GSEs' activities, I believe that the GSEs, the
new housing GSE regulator, and FCA-the regulator of Farmer Mac and FCS-
should research the areas that we have identified as well as others and
periodically report their findings to the public.
Mr. Chairman, this concludes my statement. In summary, I believe that the
following steps can be taken to strengthen GSE governance and oversight:
o Fannie Mae and Freddie Mac should ensure that their executives report
to independent boards; FHLBank directors should be chosen through
transparent and inclusive processes; and GSE compensation packages should
include short and long-term performance measures;
o Congress should create a single housing GSE regulator that is governed
by a board or a hybrid board and director and has adequate authorities to
fulfill its safety and soundness and mission compliance oversight
responsibilities; and
o Congress should provide clearer direction to the GSEs in fulfilling
their missions-such as in the case of the GSEs' nonmortgage investments-
and the GSEs, the new GSE regulator, and FCA should research certain
aspects of the GSEs' financial activities and periodically report to the
public as to how these activities are consistent with mission
requirements.
I would now be happy to respond to any questions that you or other members
of the Committee may have.
For further information regarding this testimony, please contact Thomas J.
McCool at (202) 512-8678 or William B. Shear at (202) 512-4325.
Individuals making contributions to this testimony include Diane Brooks,
M'Baye Diagne, Rachel DeMarcus, Andrew Pauline, Wesley M. Phillips,
Mitchell Rachlis, and Karen Tremba.
Staff Contacts and Acknowledgements
GAO Government-Sponsored Enterprise Related Reports
Farmer Mac: Some Progress Made, but Greater Attention to Risk Management,
Mission, and Corporate Governance Is Needed.
GAO-04-116. Washington, D.C.: October 16, 2003
Federal Home Loan Bank System: Key Loan Pricing Terms Can Differ
Significantly. GAO-03-973. Washington, D.C.: September 8, 2003.
Financial Regulation: Review of Selected Operations of the Federal Housing
Finance Board. GAO-03-364. Washington, D.C.: February 28, 2003.
OFHEO's Risk Based Capital Stress Test: Incorporating New Business Is Not
Advisable. GAO-02-521. Washington, D.C.: June 28, 2002.
Farm Credit Administration: Oversight of Special Mission to Serve, Young,
Beginning, and Small Farmers Needs to Be Improved.
GAO-02-304. Washington, D.C.: March 8, 2002.
Federal Home Loan Bank System: Establishment of a New Capital Structure.
GAO-01-873. Washington, D.C.: July 20, 2001.
Comparison of Financial Institution Regulators' Enforcement and Prompt
Corrective Action Authorities. GAO-01-322R. Washington, D.C.: January 31,
2001.
Capital Structure of the Federal Home Loan Bank System . GAO/GGD-99-177R.
Washington, D.C.: August 31, 1999.
Farmer Mac: Revised Charter Enhances Secondary Market Activity, but Growth
Depends on Various Factors. GAO/GGD-99-85. Washington, D.C.: May 21, 1999.
Federal Housing Finance Board: Actions Needed to Improve Regulatory
Oversight. GAO/GGD-98-203. Washington, D.C.: September 18, 1998.
Federal Housing Enterprises: HUD's Mission Oversight Needs to Be
Strengthened. GAO/GGD-98-173. Washington, D.C.: July 28, 1998.
Risk-Based Capital: Regulatory and Industry Approaches to Capital and
Risk. GAO/GGD-98-153. Washington, D.C.: July 20, 1998.
Government-Sponsored Enterprises: Federal Oversight Needed for Nonmortgage
Investments. GAO/GGD-98-48. Washington, D.C.: March 11, 1998.
Federal Housing Enterprises: OFHEO Faces Challenges in Implementing a
Comprehensive Oversight Program. GAO/GGD-98-6. Washington, D.C.: October
22, 1997.
Government-Sponsored Enterprises: Advantages and Disadvantages of Creating
a Single Housing GSE Regulator. GAO/GGD-97-139. Washington, D.C.: July 9,
1997.
Housing Enterprises: Investment, Authority, Policies, and Practices.
GAO/GGD-91-137R. Washington, D.C.: June 27, 1997.
Comments on "The Enterprise Resource Bank Act of 1996."
GAO/GGD-96-140R. Washington, D.C.: June 27, 1996.
Housing Enterprises: Potential Impacts of Severing Government Sponsorship.
GAO/GGD-96-120. Washington, D.C.: May 13, 1996.
Letter from James L. Bothwell, Director, Financial Institutions and
Markets Issues, GAO, to the Honorable James A. Leach, Chairman, Committee
on Banking and Financial Services, U.S. House of Representatives, Re:
GAO's views on the "Federal Home Loan Bank System Modernization Act of
1995." B-260498. Washington, D.C.: October 11, 1995.
FHLBank System: Reforms Needed to Promote Its Safety, Soundness, and
Effectiveness. GAO/T-GGD-95-244. Washington, D.C.: September 27, 1995.
Housing Finance: Improving the Federal Home Loan Bank System's Affordable
Housing Program. GAO/RCED-95-82. Washington, D.C.: June 9, 1995.
Government-Sponsored Enterprises: Development of the Federal Housing
Enterprise Financial Regulator. GAO/GGD-95-123. Washington, D.C.: May 30,
1995.
Farm Credit System: Repayment of Federal Assistance and Competitive
Position. GAO/GGD-94-39. Washington, D.C.: March 10, 1994.
Farm Credit System: Farm Credit Administration Effectively Addresses
Identified Problems. GAO/GGD-94-14. Washington, D.C.: January 7, 1994.
Federal Home Loan Bank System: Reforms Needed to Promote Its Safety,
Soundness, and Effectiveness. GAO/GGD-94-38. Washington, D.C.: December 8,
1993.
Improved Regulatory Structure and Minimum Capital Standards are Needed for
Government-Sponsored Enterprises. GAO/T-GGD-91-41. Washington, D.C.: June
11, 1991.
Government-Sponsored Enterprises: A Framework for Limiting the
Government's Exposure to Risks. GAO/GGD-91-90. Washington, D.C.: May 22,
1991.
Government-Sponsored Enterprises: The Government's Exposure to Risks.
GAO/GGD-90-97. Washington, D.C.: August 15, 1990.
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