Wednesday, December 31, 2014


Michael H. Krimminger, a former top official with the Federal Deposit Insurance Corporation (FDIC) and who advised Congress on writing the law that established FHFA’s role with Fannie and Freddie, wrote for American Banker last week that “FHFA is ignoring the basic duty of a trustee: to protect the interests of all creditors.” Instead, he explains, FHFA is violating that responsibility by favoring the Treasury. “While Treasury provided critical up-front funding to the GSEs [Government-Sponsored Enterprises], it has now been well-compensated under the original agreements. It cannot simply strip the companies of cash in perpetuity. … The continuation of the sweeps through the conservatorships is a violation of every principle established in bankruptcy and in the more than 80 years of FDIC bank resolutions,” writes Krimminger. And it violates the law under which Fannie and Freddie fell under FHFA control.

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