BMO analysts led by Margaret Kerins.....>

US AGENCIES: BMO analysts led by Margaret Kerins said the US Treasury and

Federal Housing Finance Agency "agreed to allow Fannie Mae and Freddie Mac to

hold $3 bn in capital beginning in the fourth quarter vs. $600 million last

quarter. In order to achieve this, Fannie Mae and Freddie Mac are allowed to

retain $2.4Bn of the dividend amount payable to Treasury at the end of this

year. This should lower the dividend payment to Treasury to a combined $2.9Bn."

- They said "the higher capital buffer should help absorb losses and due to the

deferred tax asset revaluation and also lower the Treasury draw needed to remain

solvent. For example, we estimate that Fannie Mae and Freddie Mac's deferred tax

assets will decline by a combined $27Bn resulting in a loss of about $18Bn in

the quarter that the tax legislation is enacted. Based on average quarterly

earnings, we estimate a combined potential Treasury draw of about $7.6Bn. This

is $4.8Bn lower than originally expected due directly to the increase in

capital."