As widely noted last week, the GSEs’ 4Q and year-end reports demonstrate steady-as-you-go earnings with almost no relevance to real risk or return for publicly-held, regulated entities.  Looking for clues to the future of the GSEs in conservatorship and to come, we dove deeply for any insights into how the current, undisclosed FHFA capital framework applies to the GSEs.  Fannie is essentially mum, but Freddie provides a dollar total that permits some interesting back-of-the-envelope conclusions.  One of these is that, as always, the GSEs are highly leveraged.  Further, Fannie and Freddie are also significantly under-capitalized on the still more important risk-based criterion.

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