The FHFA has adopted bank-like capital standards for Fannie and Freddie, but the result won’t be bank-like returns on equity, making a public stock offering for the two entities more difficult.

With combined assets worth about $6.1 trillion, Fannie Mae and Freddie Mac will need to set aside roughly $250 billion in leveraged capital in order to comply with the new rule.

A 91% drop in GSE earnings during 1Q has raised concerns about their second-quarter performance and exit from conservatorship.

Milbank has received a one-year, $3 million contract to provide legal services related to ending the conservatorships of the GSEs.

The industry has once again written to Congress requesting that guarantee fees be used only as originally intended: as a critical risk management tool to protect against potential mortgage credit losses.

If Treasury converts its senior preferred shares to commons and the GSEs go for a public offering, existing shareholders will take a haircut. Valuations on the commons could dip to $1/share for Fannie and $2 for Freddie.

In a plan that began at least as far back as 2016, the FHLBanks actively considered buying one of the government-sponsored enterprises. Even senior staff at Treasury and FHFA were involved.

Asked what levels of capital would be necessary in order to release Fannie and Freddie from conservatorships, Treasury and FHFA said it is “premature” to comment on specific levels.

If billionaire Mike Bloomberg starts looking like a front-runner in the 2020 presidential elections, putting out stock offerings on Fannie Mae and Freddie Mac could prove difficult.

Just like previous budgets proposed by President Trump, the 2021 version stands little chance of getting passed by Congress. But it does provide a win-dow into the administration’s priorities.