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Can we bury @FHFA in the same coffin?
— Guido da Costa Pereira (@GuidoPerei) July 10, 2024
SPS aren't regulatory capital. $402B core capital shortfall over Minimum (Leverage) Capital requirement, makes the debate about capital requirements in FnF, pointless. Brought to you by the controversial member of Fairholme's legal team, Timothy Howard, all day with "bank-like", when the Basel framework for capital requirements is assessed for the same credit exposure.
As required by the Treasury Department in 2011 for the release from conservatorship: increase the guarantee fees so that FnF are subject to the same capital standards as the fully private banks (Basel framework). That is, a Charter revoked scenario (no UST backup of FnF anymore, "GSEs")
Minimum Risk-Based Capital requirement: The CET1 and Total Capital requirements as percentage of the Risk-Weighted Assets (RWA), coincides with the U.S. banks and Basel (4.5% and 8%, respectively. ERCF tables)
But with regard to the minimum Leverage ratio in FnF (previously known as Minimum Capital level), the TIER 1 Capital > 2.5% of Adjusted Total Assets, stands below the U.S. banks with TIER 1 Capital > 3% of Total Assets. This is the binding capital requirement in FnF (highest).
Here the FHFA might have considered their monoline insurance business model.
The FHFA's "back-end" Capital Rule (unveiled after the typical Transition Period to build capital when there are changes, due to the lack of "18-month IMPLEMENTATION" section in the amendment in HERA of the FHEFSSA, like before) that came into effect on February 16th, 2021, adopted the Basel framework for capital requirements.
It means that it's a framework and the FHFA or the Federal Reserve, through regulation, are allowed to change the inputs. For instance:
▪️The Risk-Weights in the mark-to-market LTV/Credit Score matrix to calculated the RWA, an amount later multiplied by the percentage of capital requirement;
▪️A 20% Risk-Weight floor in FnF;
▪️Capital Buffers (above the minimums), which should be a decision by the management, because the minimum regulatory capital already absorbs losses directly or through Prompt Corrective Actions.
▪️The GSIBs have a surcharge.
▪️Etc.
But the Federal Agencies can't change the framework, that is, the capital metrics, their definition and, thus, the fact that the cumulative dividend SPS are NOT considered regulatory capital (not loss-absorbing capacity with the dividend suspended); The concept of "Capital Reserve" doesn't exist in the Basel framework; Likewise, the figure of "Net Worth" isn't considered to evaluate the soundness and solvency, but the capital metrics. Etc.
This rogue Ihub poster sounds familiar to me.
Any impact on Fannie / Freddie capital reserves requirements?
The Chief Information Officer (CIO) of Fannie Mae reported a holding of 1,300 $FNMA one year ago.
🫡
First Time Ever An Insider Reports Holding Common Stock!!!!
169,755 share $Freddie $Block $Trade ...
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