FHFA’s Capital Rule Is a Step Backward

Jim Parrott, Bob Ryan and Mark Zandi

Housing Policy Debate, 2021, vol. 31, issue 1, 4-15

Abstract: In this article, the authors summarize and critique the Federal Housing Finance Agency’s recent capital proposal for Fannie Mae and Freddie Mac, concluding that it misapplies the bank capital regime in a way that would ultimately take the government-sponsored enterprises (GSEs) and the housing finance system in the wrong direction, unnecessarily leading to higher mortgage rates, riskier GSEs, and a less stable housing finance system. Note that after this article was written, FHFA finalized their capital rule. While they modified it somewhat from the proposal critiqued here, the final rule is largely subject to the same criticisms.

Date: 2021
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DOI: 10.1080/10511482.2020.1850018

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