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We expect that Congress will continue to hold hearings and consider legislation in 2011 on the future status of Fannie Mae and Freddie Mac. Several bills have been introduced that would place the GSEs into receivership after a period of time and either grant federal charters to new entities to engage in activities similar to those currently engaged in by the GSEs or leave secondary mortgage market activities to entities in the private sector. For example, legislation has been introduced in both the House of Representatives and the Senate that would require FHFA to make a determination within two years of enactment whether the GSEs were financially viable and, if the GSEs were determined not to be financially viable, to place them into receivership. As drafted, these bills may upon enactment impair our ability to issue securities in the capital markets and therefore our ability to conduct our business, absent the federal government providing an explicit guarantee of our existing and ongoing liabilities.
In addition to bills that seek to resolve the status of the GSEs, numerous bills have been introduced and considered in the House of Representatives that could constrain the current operations of the GSEs or alter the existing authority that FHFA or Treasury have over the enterprises. The Subcommittee on Capital Markets and Government Sponsored Enterprises of the Financial Services Committee has approved bills that would:
  •  suspend current compensation packages and apply a government pay scale for GSE employees;
  •  require the GSEs to increase guaranty fees;
  •  subject GSE loans to the risk retention standards in the Dodd-Frank Act;
  •  require a quicker reduction of GSE portfolios than required under the senior preferred stock purchase agreement;
  •  require Treasury to pre-approve all GSE debt issuances;
  •  repeal the GSEs’ affordable housing goals;
  •  provide additional authority to FHFA’s Inspector General;
  •  prohibit FHFA from approving any new GSE products during conservatorship or receivership, with certain exceptions;
  •  prevent Treasury from amending the senior preferred stock purchase agreement to reduce the current dividend rate on our senior preferred stock;
  •  abolish the Affordable Housing Trust Fund that the GSEs are required to fund except when such contributions have been temporarily suspended by FHFA;
  •  require FHFA to identify mission critical assets of the GSEs and require the GSEs to dispose of non-mission critical assets;
  •  cap the maximum aggregate amount of funds Treasury or any other agency or entity of the federal government can provide to the GSEs subject to certain qualifications;
  •  grant FHFA the authority to revoke the enterprises’ charters following receivership under certain circumstances; and
  •  subject the GSEs to the Freedom of Information Act.
We expect additional legislation relating to the GSEs to be introduced and considered by Congress in 2011. We cannot predict the prospects for the enactment, timing or content of legislative proposals regarding the future status of the GSEs.
In sum, there continues to be uncertainty regarding the future of our company, including how long we will continue to be in existence, the extent of our role in the market, what form we will have, and what ownership interest, if any, our current common and preferred stockholders will hold in us after the conservatorship is terminated. See “Risk Factors” for a discussion of the risks to our business relating to the uncertain future of our company. Also see “Risk Factors” in our 2010 Form 10-K for a discussion of how the uncertain future of