Fantasy capital
A post on Accrued Interest concerning Fannie and Freddie caught my eye. Two quotes. First:
delinquencies on their guarantee portfolio remain relatively small (0.81% for Freddie Mac and 1.22% for Fannie Mae)...And second
Under current statues, the GSEs minimum capital required is 0.45% of of their guarantee portfolioSo their current level of losses is roughly twice the capital requirement - a level of capital which was presumably intended to cover unexpected losses at a high degree of confidence. If a more craven example of the supine nature of the US regulatory environment were needed, I don't know where to find it.
Labels: Capital, Federal Agency, Regulation
posted by David Murphy at 06:56
2 Comments:
Actually, delinquencies <> losses. Just to make it clear.
Well yes. But many delinquencies turn into losses. And one would expect that the capital required for a portfolio is much bigger than the experienced losses on it.
Post a Comment
<< Home