Home financing oversight agency warns of effects of budget delays

Congress' protracted fiscal 2004 appropriations process has placed "severe constraints" on the Office of Federal Housing Enterprise Oversight's capacity to implement reforms at Freddie Mac and carry out other oversight responsibilities, OFHEO's director told the House Financial Services Capital Markets Subcommittee Wednesday.

"The short-term continuing resolutions we are operating under prevent us from hiring the additional examiners, accountants and analysts we need to strengthen our oversight," Armando Falcon said during a hearing on OFHEO's December report on its special examination of the Freddie Mac accounting scandal.

Falcon said the short-term CRs also have prevented OFHEO from hiring the forensic accounting help it needs for its review of Fannie Mae, and he made an "urgent appeal" for the committee's assistance in obtaining OFHEO's requested 2004 funding levels.

"If a long-term CR is enacted which freezes OFHEO's budget at fiscal 2003 levels, we will need to scale back oversight at the very time that greater oversight has never been more urgent," said Falcon, whose office has entered into a consent agreement with Freddie Mac that requires Freddie Mac to pay $125 million in fines and modify its corporate governance.

Financial Services Committee Chairman Michael Oxley, R-Ohio, said he believes OFHEO is under-funded and "lacks many of the necessary powers" to provide adequate oversight of Freddie Mac and Fannie Mae. "I support additional funding for OFHEO so that it can fully examine the [government-sponsored enterprises] and hire a sufficient number of examiners to monitor these complex financial institutions," Oxley said.

Oxley said he is "encouraged" by Freddie Mac's current remediation efforts, and said many of the recommendations in OFHEO's report should be implemented. But he noted that an outside auditing firm, and not OFHEO, was the first to discover improper trading practices and earnings management at Freddie Mac.

"Director Falcon has presented an in-depth review of Freddie Mac, but the question remains -- where was OFHEO when these improper trades were taking place?" Oxley said.

Financial Services Capital Markets Subcommittee ranking member Paul Kanjorski, D-Pa., said he found it "very disturbing" that OFHEO had not picked up on those irregularities. "I don't know what we do about it, short of having maybe dual auditing or ... a change of auditors periodically," Kanjorski said.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
Close [ x ] More from GovExec

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.


When you download a report, your information may be shared with the underwriters of that document.