FHFA’s final rule detailing how to shut down a GSE was published on Monday. It’s timely – if the U.S. debt ceiling isn’t extended and Fannie and/or Freddie need Treasury capital at a time Treasury can’t provide it, the GSEs would go into mandatory receivership, as the rule again makes clear. The final rule provides some clarity on issues particularly germane to the Home Loan Banks – e.g., claim priority – but it leaves up in the air three critical questions. First, FHFA retains unlimited flexibility to set up a bridge GSE, with the rule not providing the clarity here the FDIC believes essential to making bridge structures workable in systemic resolutions. Second, we still don’t know how the surviving FHLBs would be forced to address their joint-and-several liability for a failed Bank.
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