Mel Watt’s testimony today before Senate Banking confirms the stealth-imposed capital requirements to which we drew attention in our assessment of the GSE’s 2017 financial results.  Neither he nor the report to Congress provided any insight into exactly how the new “aligned-capital” standards affect operations and g-fees, but clearly they do and Watt now also wants more.  In response to questioning today before Senate Banking, Watt indicated that he will craft a post-conservatorship capital regime by way of a forthcoming proposal for public comment.  Given the virtual certainty that the Trump Administration will end the conservatorships late this year or in early 2019, these capital rules will have far-reaching impact on the shape of U.S. housing finance.

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