I am pleased to support the FSOC’s activities-based review of secondary mortgage market activities, and in particular the activities of Fannie Mae and Freddie Mac (collectively, “the GSEs”) as the dominant private secondary market providers of liquidity.  When the GSEs collapsed in the summer of 2009, the American people were left holding the bag.  Furthermore, the subsequent Dodd-Frank Act scarcely mentioned the GSEs—let alone made any attempt to reform them.  Additional legislative attempts were made by both sides of the aisle, but all have failed.  That leaves it to us, the FSOC, to address the potential systemic risk posed by the GSEs.

The good news is that for the first time, the FSOC is formally acknowledging that any distress that affects the secondary market activities of the GSEs could pose a risk to the financial stability of the United States if not properly mitigated.  Our review is a necessary and important step in protecting American taxpayers against future bailouts and reforming our housing finance system.  I also want to commend the FHFA for its efforts to develop a robust regulatory framework tailored to the systemic risk posed by the GSEs.  We must continue to monitor the GSEs’ activities and the FHFA’s implementation of the framework, which—so long as it continues to embody strong capital requirements—should lessen the need for the FSOC to consider taking more formal action.