fnma:
risk based capital 9/2017: $115B table 5 p.72
minimum leverage 2.5% assets: $83B table 7 p. 73
minimum leverage bifurcated: $60B table 7 p. 73
so i see the most stringent capital requirement under proposed rule as $115B (pro forma 9/2017)
Yes, this is what I meant earlier: the companies will be held to the highest capital standard to be considered adequately capitalized. The numbers I used were for both companies combined, while yours are Fannie only.
And because I can't write a post without writing a short essay...
This passage at the bottom of page 21 explains some of it.
Under the statute, both in 1992 and today, an Enterprise is considered adequately capitalized when core capital meets, or exceeds, the minimum capital requirement and total capital meets, or exceeds, the risk-based capital requirement. An Enterprise is considered undercapitalized if it fails the risk-based requirement, but meets the minimum capital requirement. It is significantly undercapitalized when it fails both the minimum and risk-based capital requirements, but still has enough critical capital. It becomes critically undercapitalized when it fails both the minimum and risk-based capital requirements, as well as the critical capital requirement.
I believe I was wrong in my initial impression: the undercapitalization levels imply that risk-based capital is never less than minimum capital; there is no provision for meeting the risk-based standard but not the minimum. Though I suppose it's possible (though quite unlikely) they could be the same if the risk profile of the companies changes enough (all assets are cash?).
It's also important to note the difference between core capital, which is defined on page 255-256 as
Using the statutory definitions, core capital means the sum of the following (as determined in accordance with GAAP): (i) the
par or stated value of outstanding common stock; (ii) the par or stated value of outstanding perpetual, noncumulative preferred stock;
(iii) paid-in capital; and (iv) retained earnings.
and total capital as defined earlier on page 21
The statute, both in 1992 and today, requires the risk-based capital requirement to be met with total capital, which is the sum of core capital and a general allowance for foreclosure losses, plus “[a]ny other amounts from sources of funds available to absorb losses incurred by the enterprise, that the Director by regulation determines are appropriate to include in determining total capital” (a determination that OFHEO never made).
The minimum capital requirement of $139.5B or $103.5B (still using numbers for the combined companies) can only be met with core capital, while the higher risk-based capital requirement of $180.9B can include many other things as defined above.
This still means that the companies are at least $97.5B short of the minimum in terms of core capital. That enormous accumulated deficit really hurts. Though as I said in a previous post, I think Treasury really will just cancel the seniors or deem them repaid because what they get in return is freedom from the backstop, which in turn would remove $187.5B of the deficit, nearly eliminating it. I think the SPSPAs themselves will have to go. Attracting new capital would be nearly impossible with a $193B liquidation preference overhang, even if the dividends are halted permanently.
