Summary: A widespread perception exists in the financial markets that, during a financial emergency, the U.S. government would rescue the two largest federal housing enterprises--the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which had combined financial obligations of $1.5 trillion at the end of 1996. To lower the probability of such a costly government intervention, it is important that the Office of Federal Housing Enterprise Oversight (OFHEO) ensure the safety and soundness of Fannie Mae and Freddie Mac. OFHEO's primary means for achieving its mission are establishing capital standards for Fannie Mae and Freddie Mac and conducting on-site examinations to assess their management practices and financial conditions. This report (1) identifies the reasons why OFHEO has not issued final risk-based capital standards for Fannie Mae and Freddie Mac even though there was a December 1994 deadline for doing so and (2) assesses OFHEO's implementation of its safety and soundness examination responsibilities. GAO summarized this report in testimony before Congress; see: Federal Housing Enterprises: Operations of the Office of Federal Housing Enterprise Oversight, by Thomas J. McCool, Director of Financial Institutions and Markets Issues, before the Subcommittee on Capital Markets, Securities, and Government Sponsored Enterprises, House Committee on Banking and Financial Services. GAO/T-GGD-98-25, Oct. 30, 1997.
