Testimony 

Before the Committee on Banking, 

Housing, and Urban Affairs, U.S. Senate 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 10:00 a.m. EST 

Tuesday, February 10, 2004 GOVERNMENTSPONSORED 

ENTERPRISES 

A Framework for 

Strengthening GSE 

Governance and Oversight 

Statement of David M. Walker 

Comptroller General of the United States 

GAO-04-269T 
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 

mccoolt@gao.gov. 

Highlights of GAO-04-269T, a testimony 

before the Committee on Banking, 

Housing, and Urban Affairs, U.S. Senate 

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. 

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.
Page 1 GAO-04-269T 

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 
Page 2 GAO-04-269T 

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. 
Page 3 GAO-04-269T 

I would like to begin by summarizing the roles and responsibilities of the 

GSEs, describing their potential risks to taxpayers and the financial 

markets, and offering certain principles on governance and oversight to 

help ensure that the GSEs’ activities are safe, sound, and consistent with 

their public 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. 

 1

Through 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. 

Overview of GSEs, 

Their Risks, and 

Principles for 

Effective Governance 

and Oversight 

What are the GSEs and 

How Do They Carry Out 

Their Missions? 
Page 4 GAO-04-269T 

Table 1: Overview Information on the GSEs as of September 30, 2003 

Dollars in billions 

GSE and year 

created 

Financial 

obligations Structure Regulator 

Fannie Mae 

(1938) 

$2,187a

 For profit publicly traded OFHEO - safety & 

soundness 

HUD - mission 

Freddie Mac 

(1970) 

$1,388a

 For profit publicly traded OFHEO - safety & 

soundness 

HUD - mission 

FHLBank 

System (1932) 

$716.9b

 12 District Banks 

Member-owned 

cooperatives 

FHFB 

FCS (1916) 

$97.1c

 5 banks and 99 

Associations 

Member-owned 

cooperatives 

Farm Credit 

Administration 

Farmer Mac 

(1987) 

$7.2d

 For profit publicly traded Farm Credit 

Administration – Office 

of Secondary Market 

Oversight 

Sources: OFHEO, FHLBank System Office of Finance, Federal Farm Credit Banks Funding Corporation, and Farm Credit 

Administration (FCA). 

a

Includes 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. 

b

FHLBank System consolidated obligations. 

c

Total liabilities, including securities, bonds, and other liabilities. 

d

On-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: 

• 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 
Page 5 GAO-04-269T 

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. 

• 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. 

• 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. 

• 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. 

As a result of their activities, the GSEs’ outstanding debt and off-balance 

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 

What are the Risks of the 

GSEs? 
Page 6 GAO-04-269T 

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. 

 2

Credit 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. 

3

Office of Federal Housing Enterprises Oversight. Systemic Risk: Fannie Mae, Freddie 

Mac, and the Role of OFHEO. Washington, D.C: February 4, 2003. 
Page 7 GAO-04-269T 

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 

How Can GSE Risks Be 

Mitigated? 

The GSEs Should Lead by 

Example in Terms of Corporate 

Governance and Accountability 
Page 8 GAO-04-269T 

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 

 4

See 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). 

The GSEs Require a Strong, 

Independent, and Capable 

Regulatory System 
Page 9 GAO-04-269T 

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. 

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 
Page 10 GAO-04-269T 

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: 

• 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 

• 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, 

• Fannie Mae and Freddie Mac’s boards include five seats that are 

appointed annually by the President, serve one-year terms, and 

 5

Office of Federal Housing Enterprises Oversight. Report of the Special Examination of 

Freddie Mac. December 2003. 

6

Federal Housing Finance Board. Report of the Horizontal Review of Board Governance of 

the Federal Home Loan Banks. June 2003. 

GSE Corporate 

Governance Practices Can 

Be Improved 
Page 11 GAO-04-269T 

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. 

• 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. 

• 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. 

 7

As 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. 

8

Testimony 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.” 

9

U.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).
Page 12 GAO-04-269T 

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, 

• 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. 

• 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. 
Page 13 GAO-04-269T 

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: 

• 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. 

• 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. 

Housing GSE Regulatory 

Structure Does Not Ensure 

Effective Oversight 

GSE Regulatory Structure Can 

Be Consolidated 
Page 14 GAO-04-269T 

some FHLBanks continue to expand their mortgage purchase 

programs. 

• 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). 
Page 15 GAO-04-269T 

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). 
Page 16 GAO-04-269T 

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). 

Congress Should Ensure That 

the New Housing GSE 

Regulator Has Adequate 

Enforcement Authorities 
Page 17 GAO-04-269T 

these differences, which Congress may wish to consider in determining 

the appropriate authorities for a new GSE housing regulator: 

• 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; 

• 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 

• 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. 
Page 18 GAO-04-269T 

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. 

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).

Measures Have Not Been 

Established to Determine 

Whether the GSEs’ 

Benefits Outweigh Their 

Risks 
Page 19 GAO-04-269T 

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: 

• 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 
Page 20 GAO-04-269T 

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. 

• 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. 

• 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: 

• 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; 

• 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 

• 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 
Page 21 GAO-04-269T 

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 
Page 22 GAO-04-269T 

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. 

GAO Government-Sponsored Enterprise 

Related Reports 
Page 23 GAO-04-269T 

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. 
Page 24 GAO-04-269T 

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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