Government-Sponsored Enterprises: A Framework for Limiting the Government's Exposure to Risks
GGD-91-90
Published: May 22, 1991. Publicly Released: May 22, 1991.
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Highlights
Pursuant to a legislative requirement, GAO reviewed the risks undertaken by government-sponsored enterprises (GSE) in order to propose: (1) appropriate regulatory authorities for GSE federal regulators; (2) a regulatory structure to administer GSE oversight; and (3) capital standards to adequately protect the government's interest in GSE.
Recommendations
Matter for Congressional Consideration
| Matter | Status | Comments |
|---|---|---|
| To correct the inadequacies in the federal government's oversight of GSE, to promote safety and soundness, and to ensure fulfillment of statutory purposes, Congress should establish a Federal Enterprise Regulatory Board composed of three voting members and three nonvoting members. The voting members should include a full-time chairperson appointed by the President and confirmed by the Senate, the Secretary of the Treasury, and the Chairman of the Board of Governors of the Federal Reserve System. The nonvoting members should be the Secretaries of Agriculture, Education, and HUD. |
Closed – Implemented
|
The Housing and Community Development Act of 1992 establishes the Office of Federal Housing Enterprise Oversight to accomplish the objectives of the recommendation. |
| To correct the inadequacies in the federal government's oversight of GSE, to promote safety and soundness, and to ensure fulfillment of statutory purposes, Congress should designate the chairperson of the Federal Enterprise Regulatory Board as chief executive officer to administer the day-to-day operations of the regulator. |
Closed – Implemented
|
Public Law 102-550 established a Director in the Office of Federal Housing Enterprise Oversight, which will accomplish the objectives of the recommendation. |
| To correct the inadequacies in the federal government's oversight of GSE, to promote safety and soundness, and to ensure fulfillment of statutory purposes, Congress should provide the GSE regulator with the authority and responsibility to: (1) establish rules governing GSE; (2) monitor GSE activities and condition; (3) set capital requirements for GSE based on the risks they undertake; (4) levy assessments on GSE to cover the costs of regulation; and (5) enforce all applicable statutes and regulations. Enforcement authorities should track those available to bank and thrift regulators and their use should be tied to certain prespecified conditions. |
Closed – Implemented
|
Public Law 102-550 provides the Office of Federal Housing Enterprise Oversight with authority and responsibility that achieves the objectives of the recommendation. |
| Congress should direct the GSE regulator to establish minimum required capital standards for GSE that are based on the risks they undertake. The standards should include the sum of capital determined by: (1) empirically based tests of GSE capital adequacy to withstand credit and interest rate risk in stressful economic environments; and (2) a leverage ratio that provides capital for nonmeasurable risks calculated on the basis of on- and off-balance-sheet at-risk assets. |
Closed – Implemented
|
Public Law 102-550 requires risk-based capital levels that accomplish the objectives of the recommendation. |
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Topics
Banking regulationCapitalFederal corporationsFinancial managementFinancial management systemsGovernment sponsored enterprisesJurisdictional authorityLaw enforcementRegulatory agenciesRisk management