Fannie Mae 2009 Annual Report Download - page 37

control the outcome of any vote that is presented to the common shareholders. Accordingly, existing
common shareholders have no assurance that, as a group, they will be able to control the election of our
directors or the outcome of any other vote after the conservatorship ends.
As described above and in “Risk Factors,” the Treasury agreements also impact our business in ways that
affect our common and preferred shareholders.
GSE REFORM AND PENDING LEGISLATION
GSE Reform
In June 2009, the Obama administration released a white paper on financial regulatory reform stating that
Treasury and HUD would be developing recommendations on the future of the GSEs. The white paper noted
that there were a number of options for the reform of Fannie Mae and Freddie Mac, including:
• returning them to their previous status as GSEs with the paired interests of maximizing returns for private
shareholders and pursuing public policy home ownership goals;
• gradually winding down the GSEs’ operations and liquidating their assets;
• incorporating the GSEs’ functions into a federal agency;
• implementing a public utility model where the government regulates the GSEs’ profit margin, sets
guaranty fees, and provides explicit backing for GSE commitments;
• converting the GSEs’ role to providing insurance for covered bonds; and
• dissolving Fannie Mae and Freddie Mac into many smaller companies.
On February 1, 2010 the administration stated in its 2011 budget proposal that it “continues to monitor the
situation of the GSEs closely and will continue to provide updates on considerations for longer-term reform of
Fannie Mae and Freddie Mac as appropriate.” The same day, HUD Secretary Shaun Donovan indicated that
the administration would release a statement on the GSEs “in the very near future.”
During 2009, Congress began to hold hearings on the future status of Fannie Mae and Freddie Mac, and at
least one legislative proposal relating to the future status of the GSEs was offered. We expect hearings to
continue in 2010 and additional proposals to be discussed. The Chairman of the House Financial Services
Committee stated in January 2010, “I believe this committee will be recommending abolishing Fannie Mae
and Freddie Mac in their current form and coming up with a whole new system of housing finance.” 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
whether we will continue in our current form after the conservatorship is terminated.
Pending Legislation
On December 11, 2009, the House of Representatives passed legislation that would significantly alter the
current regulatory framework applicable to the financial services industry, with enhanced regulation of
financial firms and markets. The legislation includes proposals relating to the enhanced regulation of
securitization markets, changes to existing capital and liquidity requirements for financial firms, additional
regulation of the over-the-counter derivatives market, stronger consumer protection regulations, requirements
for the retention of credit risk by securitizers and originators of mortgage loans, regulations on compensation
practices, and changes in accounting standards. The Senate may consider its own financial reform legislation
in 2010. If enacted, such legislation could directly and indirectly affect many aspects of our business and that
of our business partners.
In June 2009, the House of Representatives passed a bill that, among other things, would impose upon Fannie
Mae and Freddie Mac a duty to develop loan products and flexible underwriting guidelines to facilitate a
secondary market for “energy-efficient” and “location-efficient” mortgages. The legislation would also allow
Fannie Mae and Freddie Mac additional credit toward their housing goals for purchases of energy-efficient and
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