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Wednesday, April 17, 2024 10:55:22 AM
Stop conflating a regulation with the law.
Regulations and law go hand in hand. Stop trying to act as if they are two entirely separate things.
The FHFA director, by regulation, can set a minimum capital requirement higher than what is mandated by 12 USC 4612(a). This is exactly what Calabria did when his ERCF made the base minimum capital requirement 2.5% of adjusted total assets rather than balance sheet assets. Thompson has kept this part of the ERCF in place.
The law, namely 12 USC 4614(a)(3)(A)(ii), requires that FHFA classify FnF as "significantly undercapitalized" if they do not meet the minimum capital requirement.
The current capital rule is a regulation. It is purely at the discretion of the Directorto set the risk based level once the APA requirements are satisfied.
This is why I only talked about the minimum capital requirement. The FHFA director has more leeway by HERA to set the risk-based requirement, but the minimum requirement is more restrictive when it comes to FnF's capital classifications outside of conservatorship.
There is nothing stopping the Director from proposing to set a revised risk based level at say 2.6%, have a public hearing and comment period and publish the new rule in the federal register.
A risk-based capital requirement of 2.6% would be based on risk-adjusted assets, which is a far lesser number than balance sheet assets or adjusted total assets. The only thing setting the risk-based capital requirement this low would accomplish would be to make the minimum capital requirement always control because it would always be higher. In order for FnF to be classified as "adequately capitalized" outside of conservatorship, they must meet both the risk-based and minimum requirements.
Obviously it is entirely possible to do what dajester wished for.
Only with respect to the risk-based capital requirement, and since both the risk-based and minimum capital requirements need to be met, it wouldn't help.
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