Regulators avert disaster for mortgage giants
WASHINGTON — A potential financial disaster that could have shaken the housing market was averted because regulators discovered accounting failures at Fannie Mae and Freddie Mac, the new head of the agency that oversees the mortgage giants said Monday.
The government-sponsored organizations appear to have gotten the message that they need to reform, but it still will take years to repair their internal problems, James B. Lockhart said in an interview with the Associated Press.
“The housing market is so important to this country,” said Lockhart, who has headed the Office of Federal Housing Enterprise Oversight for about two months. “And to have it built on what turned out to be a shaky foundation could have caused significant financial problems.”
Problems were averted, he said, because the regulators acted to identify and order corrections at Fannie Mae and Freddie Mac, which together stand behind some 40 percent of the $8 trillion U.S. home-mortgage market.
“The good news is that it was caught in time and the remedies are starting to be in place, so that there was no major problem for the average American,” Lockhart said.
“Aluminum producer Alcoa Inc. on Monday said second-quarter profit ballooned 62 percent as higher aluminum prices and strong demand from the aerospace and construction industries boosted results.
Net income surged to $744 million, or 85 cents per share, from $460 million, or 52 cents per share, a year ago. The recent results include charges of $35 million, or 4 cents per share, related to the ratification of a U.S. labor contract and the costs of preparing for a potential work stoppage during the quarter.
Revenue rose 19 percent to $7.96 billion from $6.69 billion due to higher aluminum prices and strong demand from aerospace, building and construction, commercial vehicle and can sheet markets.
Analysts polled by Thomson Financial forecast earnings of 86 cents per share on slightly higher sales of $8.01 billion.
“An activist investor in H.J. Heinz Co. asked fellow shareholders Monday to reject the company’s slate of candidates to the board.
The letter to stockholders from Nelson Peltz of Trian Group came the same day that Heinz President, Chairman and CEO William Johnson and Presiding Director Thomas Usher sent their own letter urging investors to reject Trian’s five board nominees to the 12-member board.