The latest stress tests provide a window into the risk retained by the GSEs, and therefore, into how much capital they'll need to survive the next economic crash.
The latest FHFA directive is something of a mystery. In separate 8-Ks, both Fannie and Freddie point out that no employees currently receive a base salary of more than $600,000.
The success of the mortgage giant’s settlement with creditors depended on its assertion that the sale of its assets was part of its reorganization plan rather than Chapter 11 proceedings.
Even though the preferred stock purchase agreement between the GSEs and the Treasury Department limits Fannie’s and Freddie’s capital reserves to $3 billion each, FHFA still requires the enterprises to undergo the stress test evaluation each year…