FNMFO - Incoming Frannie Final Capital Rule Is Ignition Sequence For IPO

• The capital rule is set to be imminently finalized which sets off a chain of events that is contingent on Treasury's Mnuchin agreeing to a PSPA modification or bust.
• Once finalized, FHFA director Calabria has an obligation to request capital restoration plans (CRPs) from Fannie and Freddie who have 30 days to submit for approval.
• It will be interesting to see if CRPs are requested before or after the PSPA amendment.
• It remains to be seen how you put together a capital restoration plan when a controlling shareholder lays claim to both the entire future net worth of the companies and unsurmountable liquidation preference.
• Instead of FHFA being responsible for holding up the GSE reform process, when this capital rule is finalized, it will be Treasury who holds this distinction.

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