Fannie Mae-No Politics (FNMA)

[navycmdr]

jtimothyhoward - MAY 18, 2023 AT 3:14 PM

The SCOTUS ruling on the appointment of the FHFA director WILL make that agency somewhat
more political than it had been before.

As to the capital question, I have a couple of comments.

First, while I would hope that Thompson would “scrap” the Calabria standard, it seems more likely
that she will keep its structure but just reduce the size and or/number of minimums, add-ons,
buffers and cushions Calabria added in 2020.

This should be fairly non-controversial.

Second, I wouldn’t be too concerned about the capital standard “ping-ponging every 4-8 years,
” because the 2008 Housing and Economic Recovery Act (HERA) requires it to be risk-based.
For ideological reasons, Calabria cynically added enough minimums, add-ons, buffers and
cushions to produce the 4 percent-plus “bank-like” capital percentage he wanted, thus making
the ERCF NOT risk-based (in violation of the HERA he professed to follow assiduously).

Assuming Thompson corrects this deliberate overcapitalization of the companies (at least partially),
I can’t see a future FHFA director doing again what Calabria did in 2020.