GSE Bill Provides for Receivership

Fannie Mae and Freddie Mac could face higher minimal capital requirements if they get into financial trouble and could be placed in receivership if they fail, under a bill unveiled March 26 by Senate Banking Committee Chairman Richard Shelby, R-Ala.The two government-sponsored enterprises have raised serious objections to granting their new regulator receivership powers, arguing that it would spook investors who purchase their corporate debt. Fannie Mae said the draft bill would "harm our ability to fulfill our homeownership mission." Under the Shelby bill, the new GSE regulator would have the discretion to place a failing enterprise into conservatorship or receivership. The regulator would also have the muscle to get a troubled enterprise to take corrective action to remain viable. "An effective regulator must have the ability to resolve a financial crisis at a GSE by creating a receivership," Sen. Shelby said. "The ultimate purpose of creating a new regulator, however, is to ensure that the likelihood of such a crisis and the appointment of a receiver is minimal." The senator's GSE bill also requires the regulator to consider the impact on Fannie's or Freddie's ability to achieve its housing mission before increasing the minimal capital requirement.