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August 11, 2020

To Prevent Future Taxpayer Bailouts, Better Markets Joins with Prominent Public Interest Groups Seeking Information About the FHFA’s Proposed GSE Capital Framework

Tuesday, August 11, 2020
Contact: Pamela Russell at 202-618-6433 or
Washington, D.C.  –  Dennis M. Kelleher, President and Chief Executive Officer of Better Markets, issued the following statement in connection with the filing of a joint letter seeking more information about the potential impact of the recently proposed capital framework for Fannie Mae and Freddie Mac (the “GSEs”), agencies that play a key role in supporting the U.S. housing market:
“The only thing standing between a taxpayer bailout and a failing, systemically significant financial firm is the amount of capital that firm has to absorb its own losses. Before the 2008 crash, the U.S. housing finance government-sponsored entities (GSEs) had too little capital, but they were so important to the housing market that everyone believed that they would be bailed out by the government if they got into trouble. That implicit guarantee became explicit in September 2008 when then-Treasury Secretary Hank Paulson fired his “bazooka” and put taxpayers on the hook for the GSEs’ losses. After years of GSE executives and shareholders enriching themselves, this was a clear and extreme example of privatizing gains and socializing losses.
“Better Markets wants to make sure that never happens again, but that requires that the GSEs have sufficient high-quality capital to eliminate the market belief that they have an implicit taxpayer guarantee. To address this, in part, the GSEs’ regulator, the Federal Housing Finance Agency (“FHFA”), recently proposed a capital framework for the GSEs, but it fails to provide the public with sufficient information to evaluate and comment on the proposal. That’s why Better Markets has joined other prominent housing and consumer protection advocates and sent FHFA a letter seeking additional information. 
“Eventually, structural reform of these entities will be essential, but in the meantime, the FHFA  has to get the capital requirements right. The proposed framework will have to serve the dual critical goals of maintaining the safety and soundness of the GSEs while enabling them to fulfill their core mission of supporting the housing market for the benefit of all Americans. 
“And the first step in evaluating the proposal is to understand the impact it will have on the mortgage market and the stability of the GSEs. The joint letter therefore urges the FHFA to provide additional analysis regarding those effects in advance of the comment deadline now set for Aug. 31, which should be extended. As the letter explains, without that data and analysis, ‘it will be extraordinarily difficult for the public to meaningfully comment on the proposed rule.’ We look forward to the FHFA’s response and to commenting on the proposed rule, hopefully with the benefit of the requested information.”
Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit  
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