We previously provided clients with an assessment of the statutory provisions in Dodd-Frank that end ratings reliance.  Here, we turn to implementing proposals from the banking agencies.  These confirm our earlier conclusions that 1) AAAs will be darn hard to get from whomever is left to grant them; 2) regulatory recognition of AAAs will end and this will lead to new capital/investment incentives applicable to the GSEs and RMBS; and 3) the FHLBs are at particular risk in this new regime.  This results not just from what the banking agencies are doing to meet the Dodd-Frank requirement, but also from what FHFA must also do to excise ratings from its capital rules.

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