Fannie Mae-No Politics (FNMA)

[bcde]

"FHFA proposal indicates anticipated new preferred and new common shares. Will probably have to resolve lawsuits before going to market to raise additional capital."

I do not think FHFA and its advisers have any hopes that FnF will raise any capital from market without resolving issues of NWS, SPS, Warrants, Gov LOC, lawsuits, ending conservatorsip and uplisting.

One thing FHFA can achieve with high capital requirements is, overcoming the resistance to ending conservatorship from FnF detractors.

High capital requirements cut many ways. FnF will have limited ability to support market liquidity needs for housing loans and also limited pro-cyclical capabilities. What happens to capital requirements during crisis? Without Gov support FnF will have limited pro-cyclical capabilities. Any large capital is not enough for pro-cyclical role.

Another side effect of high capital requirements, it automatically eliminates competition. Why would any one wants to start companies similar to FnF with all the restriction, when they can do the same as banks with all flexibility.

Only with optimum capital requirements FHFA can comply with White House policy directives. Too low or too high capital levels make it impossible to achieve Gov public policy goals.

Eventually administration or lawmakers will force FHFA to lower the capital requirements. This is how it happened in the past.