February 23, 2006
js-4065

Statement of Under Secretary Randy Quarles on Treasury’s Reaction to the Rudman Report

The Rudman report lays bare the earnings-at-any-cost culture that had developed over many years at Fannie Mae, and the substantial abuses that resulted.  A principal vehicle for generating these earnings was the enormous growth in the portfolio of retained mortgages, and that remains the principal legacy of this decade of abuse.   While Senator Rudman's report indicates that a number of the specific accounting violations and corporate governance problems are in the process of repair, the broad systemic risks inherent in the retained portfolio that was at the heart of the process remain unchanged.  In addition, the retained portfolio provides little added value to achieving the GSE's mission.  That is why we need legislative reform.  Treasury remains committed to seeing the presence of a world class regulator for the GSEs and ensuring a legislative mandate for reduction of the retained portfolios to reduce systemic risk.

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