On Wednesday, the FRB and OCC released proposed changes to the enhanced supplementary leverage ratio (eSLR) governing the largest U.S. banks. The day before, the Fed on its own proposed sweeping changes to how its CCAR stress test governs these same GSIBs. In this alert, we’ll lay out the eSLR proposal and its housing-market impact. We’ll turn next to CCAR and then to a wrap-up analysis putting the two complex rules together in a forward-looking assessment of how all of these changes fit in with pending legislation and the rest of the U.S. rulebook. The eSLR is a critical piece of this complex puzzle because it now stands as a costly barrier to private-sector mortgage origination, investment, and securitization for all of the big banks on which the business used to depend. As a result, regulated banks could play a considerably larger role in mortgage finance in concert with Treasury action ending the conservatorship.
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