Hugging Home Loan Banks

As we plow on with our in-depth analysis of the new capital proposal, we will continue to advise of key provisions in the massive rewrite with important implications for residential-mortgage finance.  Late last week, we looked at the overall treatment of mortgage assets, with more to come as we parse how the mortgage-specific capital rules fit into the incentives created by the proposal as a whole.  Here, we turn to an additional issue for GSEs:  what happens to their debt and equity and what it means for the future of housing finance.