As promised, FHFA has disclosed the post-conservatorship capital standards. Although FHFA’s proposal and subsequent press coverage highlighted the $181 billion in capital the GSEs would have to scrounge up under the new rules – a bit of a challenge given their combined $6 billion in actual capital – the new standards are still no more than half of the capital required of large U.S. banks despite FHFA’s assertion that its proposal is generally consistent with bank rules. This is true only if bank regulators bought all the reasons FHFA thinks the GSEs and their successors are less risky than even the very biggest banks – which they won’t. Although we doubt this framework would carry over to GSE successors, it will be a significant constraint on conservatorship pricing and products and, depending on transaction structure, a boost to MI and CRT.
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