Is GSE capital proposal an academic exercise — or a whole lot more?
By Hannah Lang
As with anything in housing finance reform, analyzing a proposed capital framework for Fannie Mae and Freddie Mac starts with these massive caveats: the government-sponsored enterprises are still in conservatorship, and long-term reform is still way out of reach. To some observers, therefore, the proposal released Tuesday by the Federal Housing Finance Agency — outlining risk-based capital and minimum leverage ratio requirements similar to those imposed on banks — was somewhat of an academic document. …“Although FHFA says its new approach is ‘generally’ like that governing large banks, it’s in fact strikingly different, especially in comparison to the largest U.S. banks,” said Karen Shaw Petrou, managing partner of Federal Financial Analytics. “As a result, under these rules, Fannie and Freddie will remain the prime movers of U.S. mortgage finance. Their combination of size and capital advantage means that they’ll beat banks every time, every way, every day.”