Fannie Mae-No Politics (FNMA)

[kthomp19]

You may see it as a minor point, but wouldn't it be more accurate to say capital raises would have to be a combination of retained earnings and common shares? I know this gets into debates about opinions related to timing, which I'm not interested in debating. I'm just asking for clarity in capital structure.

I think this is more about semantics than timing. When I say capital raises, I mean share sales to outside investors. This group might have some overlap with current shareholders too. But I don't consider retained earnings to be a capital raise (as an active action).

Mnuchin said "accumulate and raise capital" in one of his hearings two weeks ago, and I keep the same distinction in my mind. Retained earnings is accumulating capital (passive), share sales is raising capital (active).

My point was that given the definitions of capital in the capital rule, any share sales must be all commons (i.e. not prefs) if the juniors are not converted.

Retained earnings go into CET1, correct?

Yes, and also to Tier 1 and core capital.