Bernanke: Fannie Mae, Freddie Mac could use more capital
Federal Reserve Chairman Ben Bernanke said Thursday said that Fannie Mae and Freddie Mac were among a number of US mortgage providers that could use fresh capital to weather an ongoing credit crisis, dpa reported.
The central bank chief stopped short of reinforcing speculation that the two lending giants were in serious danger of collapse.
"We've called upon all financial institutions to expand their capital bases," Bernanke said in testimony before the Financial Services Committee of the US House of Representatives.
Bernanke said he believed Fannie Mae and Freddie Mac - which together own or guarantee about half of all US home loans - were "well capitalized" for the moment, but he included both of them in a "broad call for increased capital."
The share price of the two government-chartered companies plummeted this week after Wall Street analysts raised concerns that neither had enough capital reserves to offset writedowns stemming from the US mortgage crisis. Fannie Mae has fallen 22 per cent, and Freddie Mac dropped 43 per cent.
Treasury Secretary Henry Paulson earlier told the same House committee that the two lenders were "adequately capitalized."
Bernanke's and Paulson's comments were part of a broader call for tighter regulation of financial institutions, whose inordinate risks helped spur the current mortgage crisis in the United States.
Both officials said that Fannie Mae and Freddie Mac remained crucial to the stability of the US housing market, which is already in the midst of one of its steepest-ever declines, but they did not say how far the Fed and other regulators might go to keep the two mortgage lenders afloat.
"They're at this point a very big part of the existing mortgage market," Bernanke said. "I think they could do an even better job if they were better supervised and better capitalized."