Fannie Mae Preferred S (FNMAS)

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What matters from that report is on page 35 where Blackstone communicates to Treasury "Private capital will not make a substantial commitment to a solution in the absence of any likelihood of a meaningful return of capital" and then they add this critical line:

The first step in demonstrating the possibility of a return on capital is to generate capital to build more stable balance sheets

by

- profis improvements
- higher guarantee fees
- reversal of loan loss reserves
- increased capitalization of tax attributes

This document is not important because it may prove Treasury has been calling the shots forever but because it shows Treasury was informed of facts they now claim they did not know. It is important because the discussions that this document supported were held 15 months prior to the enactment of the sweep amendment. And in these discussions Blackstone told the government of a) the DTA issue that would come into play, b) the need to let companies rebuild capital implicitly letting shareholders share in profits in order to attract future private capital.

Since the official tune has been -including Corkers et al. and all the other proposed bills- that any reform must attempt to attract private capital back -still MIA- one can question how hurting current shareholders would achieve this goal when all actors involved had already been told by Blackstone in June 2011 that it wouldn't. Treasury knew yet in its advisory role helped design Corker's bill to presumably attract private capital back in while still hurting legacy private capital.

Briefly, Treasury knew prior to the sweep -this is now a fact- that companies could land a windfall and also knew that for private capital to return that windfall should have stayed within the balance sheet of the companies as proof that government would respect private property and investors' rights (this isn't in the document but it is not a stretch to figure out). Yet, Treasury chose the sweep going against their own public discourse of working hard to entice private capital back in.

Good luck explaining all this to J. Sweeney.