FEDERAL HOME LOAN MORTGAGE CORPORATION--Continued the sale of multifamily mortgage pass-through securities. This was also the first time a mortgage passthrough security was sold exclusively to international investors. Freddie Mac continued to pioneer the international markets throughout 1985 and into 1986 by targeting the CMOS to the special investment needs of foreign investors. With both the multifamily PC and the CMOs, Freddie Mac has successfully tapped $734 million in additional funds internationally in order to provide af fordable mortgage credit to American homebuyers. In 1986, Freddie Mac responded to another mortgage finance industry need when it introduced a mortgage pass-through security backed by adjustable rate mortgage ("ARMs"). The ARM security, along with Freddie Mac's ARMS purchase programs, provides lenders with greater flexibility in originating and selling ARMs into the secondary market. The forecast data contained in this material have been developed on the basis of certain economic assumptions that are reviewed and revised periodically. The estimates are subject to forecast error and will normally differ from actual data when these become available. These estimates should not be construed as an official forecast of the corporation's future position. Revenue and Expenses Gross revenue. Gross expenses. Income before Federal income tax. Federal income tax. Net income. -23,985,000 -26,388,000 -22.880.000 -1,390,000 - 1,561,000 54,882,000 55,265,000 47.145.300 47:45 30 Status of Direct Loans (in thousands of dollars) Administration-proposed legislation.-The Administration believes that because of Freddie Mac's government-sponsored status, its securities enjoy an interest rate advantage in the credit markets. This gives Freddie Mac a significant competitive advantage relative to private mortgage conduits. In 1982, the President's Housing Commission concluded that Freddie Mac and other Federal and government-sponsored housing agencies impeded the growth of private mortgage conduits and recommended that the Administration seek to privatize them. In 1983, the President's Private Sector Survey on Cost Control (Grace Commission) reached the same conclusion and made a similar recommendation. The Administration supports the privatization of Freddie Mac and is studying ways of transitioning Freddie Mac to completely private status. Privatization of Freddie Mac (and Fannie Mae) would eliminate the major hurdle private mortgage conduits face in playing a sig nificant role in the nation's housing credit markets. However, while Freddie Mac continues to enjoy its Federal agency status, private mortgage conduits will continue to have difficulty competing with it. In order to mitigate the effects of this unfair competition, the Administration is proposing legislation to prohibit Freddie Mac (and Fannie Mae) from purchasing mortgages in the top quartile of the home price distribution in any housing market (but not to exceed $153,100-an amount that would not be indexed). This will limit Freddie Mac's continued encroachment on the market served by private mortgage conduits for as long as Freddie Mac maintains its association with the Federal government. BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Program and Financing (in thousands of dollars) The Federal Reserve System operates under the provisions of the Federal Reserve Act of 1913, as amended, and other acts of Congress. Program. To carry out its responsibilities under the act, the Board determines general monetary, credit, and operating policies for the System as a whole and formulates the rules and regulations necessary to carry out the purposes of the Federal Reserve Act. The Board's principal duties consist of exerting an influence over credit conditions and supervising the Federal Reserve banks and member banks. Financing-Under the provisions of section 10 of the Federal Reserve Act, the Board of Governors levies upon the Federal Reserve banks, in proportion to their capital and surplus, an assessment sufficient to pay its estimated expenses. The Board, under the act, determines and prescribes the manner in which its obligations are incurred and its expenses paid. Funds derived from assessments are deposited in the Federal Reserve Bank of Richmond, and the Act provides that such funds "shall not be construed to be Government funds or appropriated moneys." No Government appropriation is required to support operations of the Board. The information presented pertains to Board operations only. This information has been prepared in accordance with OMB guidelines; accordingly it may differ from other financial material published by the Board of Governors. Expenditures made on behalf of the Federal Reserve banks for production, issuance, retirement, and shipment of Federal Reserve notes are not included, since they are reimbursed in full by the Federal Reserve banks. Revenue and Expense (in thousands of dollars) Program by activities: Operating expenses Net operating income or loss (-) Financial Condition (in thousands of dollars) 16.095 17,630 17,850 |