In this report, we analyze FHFA Director Watt’s appearance today before Senate Banking in which he outlined plans to develop new GSE capital standards and took fire from Republicans on a raft of new GSE ventures. FHFA will shortly propose a risk-based and leverage capital rule that would be suspended for the duration of the conservatorship but apply to the GSE successors resulting from Treasury action or, if Congress adopted the rules, legislative reform. Sens. Crapo (R-ID) and Corker (R-TN) said these should be akin to large-bank or even GSIB rules, which Mr. Watt accepted in concert with pointing out that the GSEs are monoline firms and thus not directly comparable to GSIBs.
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