Fannie Mae and Freddie Mac, the government-run companies that stand behind about half of the $11 trillion U.S. mortgage market, pose a potential danger to the stability of the broader financial system, a Treasury-led panel said on Friday, Politico reported. The companies still do not have enough capital to protect themselves from the massive risk in their portfolios, the Financial Stability Oversight Council concluded following a long-awaited review of the secondary mortgage market, where investors purchase home loans. The council, which consists of all the government's top financial regulators, endorsed a proposal to raise capital requirements for Fannie and Freddie, saying it would go a long way toward mitigating the peril looming over the system. Fannie and Freddie have been at the center of a fierce debate between Republicans and Democrats ever since the government rescued the two companies from collapse during the 2008 financial crisis. Republicans have pushed to boost their capital to prepare them for privatization. But some Democrats and affordable housing advocates warn that the stricter capital requirements could drive up the cost of mortgages and limit Fannie and Freddie’s ability to serve low-income communities.
