​​Public Remarks as Prepared for Delivery
Dr. Mark A. Calabria
Director, Federal Housing Finance Agency

FINANCIAL STABILITY OVERSIGHT COUNCIL
PRINCIPALS MEETING 

Friday, June 11, 2021

At today's Financial Stability Oversight Council Principals Meeting, FHFA Director Mark Calabria gave statements on Money Market Fund reform, LIBOR transition, and FHFA.

On Money Market Funds, Director Calabria said:

“I welcome and fully support the SEC's work on Money Market Fund reform. While the President's Working Group focuses on Prime Money Market Fund reform, it is important to also bear in mind risks from Government Money Market Funds.  Government Money Market Funds have large exposures to FHFA's regulated entities: Fannie Mae, Freddie Mac, and the Federal Home Loan Banks [see charts below]. This interconnectedness can pose risks to the financial system. In the case of Enterprise debt, these concerns are heightened by the high leverage of Fannie Mae and Freddie Mac. In light of the potential risks posed by this interconnectedness, FHFA will continue to support the Council's monitoring of Money Market Funds."

Money Fund Regulated Entity Debt Holdings

Share of Regulated Entity Debt Owned by Money Funds

On the LIBOR transition, Director Calabria said:

“FHFA and its regulated entities have been leaders in the transition away from LIBOR. Fannie Mae and Freddie Mac worked for years to develop the parameters of alternative rate-based products that would be acceptable to all parties, including borrowers, lenders, servicers, and investors. With LIBOR going away, a wait-and-see approach for our regulated entities was and is not an option.

Fannie Mae issued the very first SOFR-based debt in July 2018.  Freddie Mac and the Federal Home Loan Banks soon followed. Now the Federal Home Loan Banks are the largest issuers of SOFR-based floating-rate debt. 

Our work with the Enterprises was carefully sequenced. First, we worked to provide updated and transparent language for new LIBOR products that would fully anticipate the end of LIBOR. Second, we ensured new replacement products were developed in time to be ready and on the market prior to LIBOR's end. Third, we discontinued the purchase and production of LIBOR products as the new products came online. Since then, we have been working on issues related to the transition away from LIBOR of previously issued, or 'legacy,' LIBOR products.

FHFA's efforts to transition away from LIBOR have been guided by the same core objectives that direct all the Agency's work: ensuring the safety and soundness of our regulated entities, supporting liquidity and resilience in our nation's housing finance markets, and protecting homeowners and renters.

While important work remains, I am confident that we will meet our goal of fully transitioning the Enterprises and FHLBanks away from LIBOR by the end of 2021. This is thanks to the hard work of many FHFA staff, led by Daniel Coates, to prepare FHFA and its regulated entities for this critical transition.

I also want to thank Vice Chair Quarles for his leadership during this critical transition."

Director Calabria also discussed FHFA's implementation of the Council's recommendations for the Agency in the Council's September 2020 activities-based review of the secondary mortgage market.

Director Calabria said:

“A​s recommended by this Council, FHFA continues to develop a more robust prudential regulatory framework for the Enterprises, strengthening Enterprise liquidity regulation, stress testing, supervision, and resolution planning. This will lead to a more durable secondary mortgage market that helps provide sustainable access to mortgage credit across the economic cycle and will be more resistant to shocks."​
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