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On July 30, 2008, President George W. Bush signed Public Law 110-289, the Housing and Economic Recovery Act of 2008 (HERA), which established FHFA, giving the agency authority to place regulated entities into conservatorship or receivership.

On September 6, 2008, in order to restore the balance between safety and soundness and mission, FHFA placed Fannie Mae and Freddie Mac into conservatorship. That is a statutory process designed to stabilize a troubled institution with the objective of returning them to normal business operations. FHFA will act as the conservator to operate the Enterprises until they are stabilized.

Disclosure of Capital Positions During Conservatorship

The Director has determined that it is prudent and in the best interests of the market to suspend capital classifications of Fannie Mae and Freddie Mac during the conservatorship, in light of the United States Treasury's Senior Preferred Stock Purchase Agreement.  FHFA will continue to closely monitor capital levels, but the existing statutory and FHFA-directed regulatory capital requirements will not be binding during the conservatorship.

During the conservatorship, FHFA will not issue a quarterly capital classification.  The Enterprises will continue to submit capital reports to FHFA during the conservatorship. Relevant capital figures (minimum capital requirement, core capital, and GAAP net worth) will be available in the Enterprises' quarterly 10-Q filings, as well as on FHFA's website to ensure market transparency.  FHFA does not intend to publish critical capital, risk-based capital, or subordinated debt levels during the conservatorship.

Note:  Minimum Capital and Risk-Based Capital were last updated on October 9, 2008. Critical Capital and Subordinated Debt information were not updated in accordance with the FHFA news release issued on October 9, 2008.

Comprehensive Historical Classifications 



Subordinated Debt

As of September 1, 2005 both Fannie Mae and Freddie Mac established formal arrangements under which both GSEs would issue subordinated debt pursuant to a bi-annual plan reviewed by their regulator and subject to the continuing oversight of the agency. The agreements also encompass both GSEs’ making public disclosures related to risk and represent the transformation of the 'voluntary initiative'  announced by both GSEs on October 19, 2000 into a enforceable agreement with their federal regulator.

Subordinated debt is not part of regulatory core capital or total capital, as defined in [FHFA's] statute and regulations. 

Qualifying Subordinated Debt History (Pre-Conservatorship) 

How and When GSE’s Subordinated Debt Requirement is Determined

FHFA  determines and publishes the GSEs’ qualifying subordinated debt requirements on a quarterly basis. The requirements for qualifying subordinated debt are defined in the September 1, 2005 agreements between OFHEO and the GSEs. Subordinated debt will be issued in a quantity such that the sum of the total capital (core capital plus general allowance for losses) plus the outstanding balance of qualifying subordinated debt will equal or exceed the sum of outstanding net MBS times 0.45 percent and total on-balance sheet assets times 4 percent.

GSEs’ Subordinated Debt Requirements

Fannie Mae and Freddie Mac Subordinated Debt Agreements (September 1, 2005)

Submit capital-related questions.

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