Federal Reserve Bank of Minneapolis President Gary Stern said Wednesday that now is not an "appropriate time" to close government-sponsored Enterprises Fannie Mae and Freddie Mac.
Speaking on Bloomberg Television, Stern said it is "important" for Fannie and Freddie to function and that they should be re-oriented towards lower income buyers.
He added that the Federal Reserve will monitor exposure other banks have to Fannie and Freddie.
"That is something obviously we will be taking a look at," he said. "But I don't think the problem with Fannie and Freddie is just confined to banks that happen to hold their preferred stock."
Stern also said the Federal Reserve needs to adopt less accommdative monetary policy before strong growth returns and that "we may have to move" on rates if inflation doesn't moderate as expected.
Right now, however, is a "good time to be patient" in setting the Fed rate, he said.
Stern added that economic growth is likely to remain "modest" for the next several quarters, and that oil prices should cause overall inflation to fall.
By Stephen Huebl and edited by Megan Ainscow