We have only cracked the surface of the new FHFA proposal and will turn shortly to its strategic and competitive implication.  However, we draw one overarching conclusion from our first cut of the complex proposal:  FHFA knows what it wants the post-conservatorship model to look like and what it would look like is what the Fed thought U.S. GSIBs should be until the Fed recanted on key Obama-era demands of the biggest U.S. banks.  Further, the Fed and other federal agencies are now neutralizing key capital rules on the fly.  This is theoretically a temporary rewrite, but we think much in it will stick.

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