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12 08, 2022

FedFin: Testing for What, Why?

2023-01-04T12:28:53-05:00August 12th, 2022|The Vault|

FHFA, Fannie, and Freddie yesterday released the results of FHFA’s latest stress test, focusing on the severely-adverse scenario in order – or so FHFA says – to push the GSEs to the limit. This the test does insofar as the GSEs’ combined CET1 capital shortfall is as much as $159 billion. However, aspects of FHFA’s test – e.g., falling inflation over 2022 and 2023 and rising house prices – are likely to be more than a bit off….

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12 08, 2022

GSE-081222

2023-01-04T12:28:23-05:00August 12th, 2022|4- GSE Activity Report|

Testing for What, Why?

FHFA, Fannie, and Freddie yesterday released the results of FHFA’s latest stress test, focusing on the severely-adverse scenario in order – or so FHFA says – to push the GSEs to the limit.  This the test does insofar as the GSEs’ combined CET1 capital shortfall is as much as $159 billion.  However, aspects of FHFA’s test – e.g., falling inflation over 2022 and 2023 and rising house prices – are likely to be more than a bit off.  The conservatorship of course insulates the GSEs from any of the consequences that would befall a big bank with even a fraction of these capital shortfalls, but it does cast doubt on when these conservatorships could end without a large line of Treasury credit still in place to back them up.

GSE-081222.pdf

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