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Monday, October 18, 2021 9:25:49 PM
Dear Acting Director Thompson:
I write to express concern with respect to two specific aspects of the proposed amendments to the
regulatory capital framework for Fannie Mae and Freddie Mac (the “GSEs”).
First, an interagency review of the Federal Housing Finance Agency’s (“FHFA”) proposed
capital rule led by the Financial Stability Oversight Council found that capital requirements “that
are materially less than those contemplated by [the proposed rule] would likely not adequately
mitigate the potential stability risk posed by the [GSEs].”
1 The proposed two-thirds reduction in
the leverage buffer could result in a material reduction in regulatory capital, increasing risks to
taxpayers and financial stability.
Second, FHFA solicited comment on whether to reduce the minimum credit risk capital
requirement on mortgage exposures (i.e., the 20 percent risk weight floor). More than half of the
GSEs’ single family mortgage exposures are subject to this minimum requirement.2 Reducing
this floor could materially reduce aggregate capital requirements and also significantly increase
the gap between the credit risk capital requirements of the GSEs and other market participants. I
urge FHFA not to reduce the 20 percent risk weight floor on mortgage exposures and, if that
change is still contemplated, to separately solicit comment on that proposed change with a
detailed preamble discussion on the safety and soundness risks, risks to financial stability, and
other implications.
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