When Agencies Combine: Lessons from the Federal Housing Finance Agency

It's been a year since GSE oversight was reconfigured.  Previously, the Department of Housing and Urban Development (HUD) was responsible for affordable housing goals for Fannie Mae and Freddie Mac, while Office of Federal Housing Enterprise Oversight was responsible for their safety and soundness.  Now the Federal Housing Finance Agency combines both functions.

So what lessons from this reorganization can transfer to the current discussion of financial institution regulatory reform?

1,  Some commentators believe that the separation of authority for safety and soundness from the housing mission of the GSEs exascerbated their problems because of a disconnect in information and a lack of coordinated oversight.  When we think about stripping the existing federal banking agencies of their consumer protection function and giving it to an entirely new, completely separate agency, we might want to think twice in light of the GSE experience.

2.  Others believe that the move to consolidate and strengthen regulation for Fannie Mae and Freddie Mac came too late.  The message here might be for Congress to move forward expeditiously with the current regulatory reform legislation.

Check out the July 8, 2009, American Banker article by Steven Sloan, "In Finance Agency's Birth, a Lesson for Obama Plan."

(ag) July 8, 2009, in Regulatory Reform, Federal Banking Agencies, Economy