Fannie Mae-No Politics (FNMA)

[kthomp19]

Is it by law as worded by Congress ? Or is it by law - as understood by FHFA and thus at this point a regulatory decision which can be changed without -- without - changing any law

Both, I suppose. It's a law passed by Congress (HERA) that directs the FHFA Director to issue regulatory capital requirements. There are two types of capital requirements: risk-based and minimum.

12 USC 4611(a)(1) pertains to the risk-based requirement:

(a) In general
(1) Enterprises

The Director shall, by regulation, establish risk-based capital requirements for the enterprises to ensure that the enterprises operate in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of the enterprises.

while 12 USC 4612(a) sets the minimum capital requirement, though part (c) allows the Director to establish a higher requirement (as Calabria and Thompson have both done):

(c) Establishment of revised minimum capital levels

Notwithstanding subsections (a) and (b) and notwithstanding the capital classifications of the regulated entities, the Director may, by regulations issued under section 4526 of this title, establish a minimum capital level for the enterprises, for the Federal Home Loan Banks, or for both the enterprises and the banks, that is higher than the level specified in subsection (a) for the enterprises or the level specified in subsection (b) for the Federal Home Loan Banks, to the extent needed to ensure that the regulated entities operate in a safe and sound manner.

One thing I don't know is why Lockhart and DeMarco never issued capital standards, or why Watt waited until his term was almost over to do so. At least Calabria fulfilled this requirement, though his final rule wasn't published until 20 months after he took office.