St. Louis Federal Reserve Bank president William Poole is calling for higher capital requirements for Fannie Mae and Freddie Mac because of the interest rate risk and operational risk posed by their huge mortgage portfolios.He also warned investors that there is no guarantee the federal government would bail out one or both of the government-sponsored enterprises if they run into financial problems that threaten their solvency. The hedging of these portfolios with $1.57 trillion in mortgage assets is "incomplete," which "raises warning flags," Mr. Poole told the St. Louis Society of Financial Analysis. The accounting problems at Fannie and Freddie also show they are subject to operational risk and "need to hold more capital against operational risk," he said.

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