GLOBAL - The lax regulatory environment was responsible for the failure of Fannie Mae and Freddie Mac, a senior figure for the regulator of the collapsed mortgage giants has claimed.
This weakness saw Fannie and Freddie leveraged by a mortgage risk to capital factor of 80:1 at one point. Lockhart said: "By the start of the year these two Government Sponsored Enterprises (GSEs) were the only game in town. They had been allowed to grow and they took advantage of this."
Lockhart, who is also a member of the Financial Stability Commission, the body set up to oversee disbursement of the US$700bn bail-out fund, said the collapse was worrying for pension funds as shares in both were still trading on Wall St, but were worth a fraction (about 1/60th) of their values last year.
Also, the mixed nature of the underlying assets in the asset backed securities (ABS) at the heart of difficulties, and the range of state laws to be complied with, made it difficult to know how to implement the bailout plan.
Lockhart added: "There are 50 different states with 50 different state laws [and] this is part of the problem. It is easy for a bank to lower the rate or restructure the deal, but there are so few deals held on back books.
"It is very hard for Fannie and Freddie and those who hold securitised deals. Different tranches will all perform differently. We will never be able to put Humpty Dumpty back together again - to de-construct the securities."
Responding to the UK and Eurozone bailout plans, Lockhart said the US plan would "be modified as we go along" in light of the UK experience and that it must work "for all our sakes".
He added: "The UK is a good learning example to the US going forward. Everyone has to move and adapt. The situation is larger and more complex in the US, but we can reach out quickly. Only time will tell if it will be enough money."
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.