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Financial Institution Letters

Statement on Investments in Fannie Mae and Freddie Mac Equity Securities FIL-93-2008
September 18, 2008


Summary: The Federal Deposit Insurance Corporation (FDIC) will work with the limited number of institutions that have significant holdings of common or perpetual preferred shares in Fannie Mae and Freddie Mac to develop Capital Restoration Plans pursuant to federal regulations. These equity investments should be reported as available-for-sale equity securities, if not held for trading purposes, and any net unrealized losses should be deducted from regulatory capital. Attached is the FDIC's "Statement on Investments in Fannie Mae and Freddie Mac Equity Securities."

Highlights:

  • On September 7, 2008, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac into conservatorship.
  • The federal banking agencies issued a press release on September 7, 2008, stating the agencies will work with the limited number of institutions that have significant holdings of Fannie Mae or Freddie Mac equity securities in relation to their capital (see PR-78-2008).
  • Institutions are reminded that investments in perpetual preferred stock and common stock with readily determinable fair values, if not held for trading purposes, should be reported as available-for-sale equity securities and that any net unrealized losses on these securities are deducted from regulatory capital.
  • The FDIC is committed to a flexible supervisory approach and will work with institutions that are required to develop a Capital Restoration Plan under the Prompt Corrective Action guidelines. The FDIC will also be flexible in considering requests for waivers from brokered deposit restrictions for institutions that have become adequately capitalized.
  • Minority Depository Institutions with significant holdings of Fannie Mae or Freddie Mac equity securities in relation to their capital are encouraged to request technical assistance from the FDIC, pursuant to Section 308 of the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

Distribution:
FDIC-Supervised Banks (Commercial and Savings)

Suggested Routing:
Chief Executive Officer
Chief Financial Officer

Related Topics:
Investments
Capital

Attachment:
FDIC's "Statement on Investments in Fannie Mae and Freddie Mac Equity Securities"

Contact:
William R. Baxter, Senior Examination Specialist, (202) 898-8514, wbaxter@fdic.gov

Marc Steckel, Chief, Capital Markets Branch, (202)898-3618, msteckel@fdic.gov

Robert Storch, Chief Accountant, (202) 898-8906, rstorch@fdic.gov

Printable Format:
FIL-93-2008 (PDF Help)

Note:
FDIC financial institution letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2008/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies of FDIC financial institution letters may be obtained via the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (1-877-275-3342 or 703-562-2200).




Last Updated 9/18/2008 communications@fdic.gov