NAFCU and ICBA Challenge FHFA on GSE Capital Buffers

Phil Hall

Oct 19, 2017

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A pair of trade groups representing longtime rival factions in the financial services industry have teamed up to urge the Federal Housing Finance Agency (FHFA) to allow the government-sponsored enterprises (GSEs) to rebuild their capital buffers.

In a joint letter to FHFA Director Mel Watt, the leaders of the National Association of Federally-Insured Credit Unions (NAFCU) and the Independent Community Bankers of America (ICBA) acknowledged that GSE reform from Congress was long overdue, but they also argued that the regulatory agency needed to ensure the GSEs could maintain capital to provide stability in the event of short-term losses.

“Allowing the GSEs to rebuild their capital buffers to avoid another draw of taxpayer support would maintain investor confidence, which is essential to the safety and soundness of the secondary market, and would prevent any further market disruptions,” NAFCU President and CEO Dan Berger said. “This would ensure the GSEs the continued ability to provide liquidity to credit unions, community banks and other lenders to support a vibrant housing finance system.”

“It is essential that the GSEs maintain a modest capital buffer—perhaps only enough to cover losses in a single quarter—so that they are not forced to draw on the Preferred Stock Purchase Agreement commitments at the expense of taxpayers,” added ICBA President and CEO Camden R. Fine. “Such an occurrence would not only erode investor confidence but would also taint the public’s perception of the housing finance system and the secondary market, putting the future of the housing finance system at risk. This self-inflicted outcome must be avoided.”

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Oct 19, 2017

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