Improved Regulatory Structure and Minimum Capital Standards Are Needed for Government-Sponsored Enterprises

GAO discussed federal oversight of government-sponsored enterprises (GSE). GAO noted that: (1) limited federal oversight of GSE inhibited the government's ability to identify and resolve future problems that could lead to taxpayer losses; (2) federal regulators lacked sufficient authority and responsibility to enforce safety and soundness rules and require minimum capital based on GSE risk; and (3) the regulatory structure lacked sufficient independence from GSE and the markets they served to protect the government's interest in GSE. GAO believes that the GSE regulator needs to: (1) establish rules that clearly define regulatory expectations and promote the safe and sound accomplishment of GSE purposes; (2) monitor financial performance and compliance with regulations to provide an adequate understanding of GSE operations, condition, and potential risk; (3) timely enforce charter restrictions, regulations, and capital requirements; (4) levy assessments to cover oversight and supervision costs; (5) structure a single independent, prominent regulator; and (6) establish minimum capital standards based on the risks GSE undertake.