The head of the U.S. Federal Housing Administration has responded to the Wall Street Journal article raising concerns that the agency might need to be bailed out if its capital reserve ratio fell below the 2 per cent demanded by Congress.
“Even if that level falls below 2 per cent, FHA continues to hold more than $30 billion in its reserves today, or more than 5 per cent of its insurance in force,” according to a statement issued by FHA Commissioner David Stevens. “Given this reserve level, FHA will not need a congressional subsidy even if the congressional capital reserve calculation falls below 2 per cent.”
“FHA’s full faith and credit insurance means that there is no risk to homeowners or bondholders independent of the congressional capital reserve requirement,” Stevens said.
You’ll be forgiven for thinking this sounds a lot like the statements issued by the heads of Fannie Mae and Freddie Mac prior to the bailout of those institutions, which happened one year ago today.
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