Fannie Mae (FNMA)

[kthomp19]

The only real relief we got was that every citizen has the right to sue the government for takings.

Wrong. The Supreme Court said that any citizen has standing to sue for a Constitutional violation. They didn't mention takings. See pages 20-21 of The Supreme Court's Collins opinion:

The right the shareholders assert in this case is one that they hold in common with all other citizens who have standing to challenge the removal restriction.
...
So whenever a separation-of-powers violation occurs, any aggrieved party with standing may file a constitutional challenge.
...
Here, the right asserted is not one that is distinctive to shareholders of Fannie Mae and Freddie Mac; it is a right shared by everyone in this country. Because the succession clause transfers the rights of “stockholder[s] . . . with respect to the regulated entity,” it does not transfer to the FHFA the constitutional right at issue.

The context here is that the government tried to throw out the Constitutional challenge by citing HERA's succession clause.

I don't know how you read something about takings into a passage about HERA's removal and succession claues in a case that doesn't even allege a takings.

Even the weak defense of "Anyone can sue for a takings anyway! And a takings without just compensation is a Constitutional violation!" doesn't work because, while that is true, it isn't relief that the Supreme Court provided in the Collins case. It was true all along.

I'll note my failures during the same period.

A woefully incomplete list. Some additions:

4) No plaintiff is challenging the warrants, original SPSPAs, or conservatorships in a way to have any of them overturned. Thus those things aren't really being "contested" or "challenged" in the normal sense, only cited as reasons the government has to pay the plaintiffs money.
5) The definition of "Fair Market Value" in the warrant contract has nothing whatsoever to do with the Exercise Price of $0.00001; Treasury has no obligation to pay "Fair Market Value" at any point.
6) "If SPS is converted to commons (it WON'T) Fannie and Freddie are instantly capitalized." is completely wrong. Senior pref conversion (or writedown) brings core capital from -$121B to $73B, which is still $108B short of the lowest possible capital standard in HERA (2.5% of balance sheet assets: 0.025 * $7.227T = $181B). It's even further away from 3% core capital (Sandra Thompson's current capital standard) and 3% CET1 capital (the current exit threshold).
7) "People still quoting the crook who sent his wards equity to the Treasury and hid the stress test results?" is only half right. The only NWS payment sent under Calabria's watch was accrued during Otting's tenure as Acting Director in Q1. By the time the Q2 dividend was supposed to be paid on Sep 30 2019, Calabria instead signed a letter agreement letting FnF keep that cash. Therefore he didn't "sen[d] his wards equity to the Treasury". Half right is an improvement, though.
8) "The public they serve is Fannie Mae, Freddie Mac and Federal Home Loan Banks." is clearly false. If that's what the Supreme Court meant, they would have struck down the NWS because it harms FnF. The "public" they mentioned was the taxpayers.
9) "That would be the minimum Treasury would owe the corporations for the warrants, if exercised." is 100% wrong. Treasury won't owe FnF a penny, outside of the $72,000 Exercise Price, if they exercise the warrants. Warrant exercise does not harm the companies whatsoever; in fact it helps them because raising outside capital is impossible while the warrants exist. Takings claims over warrant exercise will have to be direct, not derivative, which is part of why Bryndon Fisher won't be able to amend his complaint if Treasury exercises the warrants before his case finishes.
10) "I know FnF shouldn't have to buy back the warrants, but in the big scheme of things it would not be material." is inconsistent with your (mistaken) idea of "Fair Market Value". If Treasury would have to pay FnF $46B upon warrant exercise, then FnF would have to pay Treasury that same amount to buy them back. You can't have it both ways. FnF really can't afford to pay $46B of much-needed capital for warrants that are completely useless to them.
11) "It's good the Justices recognized that for all practical purposes Fannie and Freddie have been nationalised." is false. The word "nationalization" doesn't appear anywhere in the Collins opinion. What they said in oral arguments doesn't have any precedential power. Recall that Judge Sweeney called the SPSPAs a "mafia deal" (or something like that) and then she turned around and dismissed Washington Federal in its entirety.
12) "Cancellation of the SPS $193.5 billion and removal of the BOGUS accumulated deficit $148.9 billion brings the CET1 to $44.62 billion" is false. You forgot that DTAs, of which Fannie had $12.715B and Freddie $6.214B at the end of 2021, have to be subtracted. Fannie's no-SPS CET1 as of the end of 2021 was $15.474B and Freddie's was $7.556B, for a total of $23.030B (AOCI must also be deducted).
13) "The corporations can exit the fraudulent conservatorship based on the two years stress tests results the cowardly Calabria hid." (same post) is also false. FnF's core capital is currently a combined -$120.854B, and would only be $72.648B if the seniors were cancelled or converted to common. That's less than the critical capital level (defined in 12 USC 4613(a)) of 1.25% of balance sheet assets, or $90.334B right now. That means if FnF were released they would have to be classified "critically undercapitalized" by 12 USC 4614(a)(4)(A)(ii), meaning FHFA would have statutory authority (12 USC 4617(a)(3)(K)) to put FnF right back into conservatorship. You're putting the cart before the horse here. Statutory capital standards need to be hit before release, and FnF aren't there yet, even if the seniors are cancelled or converted.
14) "All TBTF banks were allowed to pay down their SPS." is irrelevant. Treasury exercised its AIG warrants, so one-offs are always possible.
15) "HERA doesn't say that SPS cannot be paid down. Show me where it does." (same post) means you're either confused or being intentionally misleading. HERA doesn't restrict the paydown of the seniors, but the senior pref stock certificates do. Read Section 3(a) on page 3 very carefully. FnF can voluntarily pay down the seniors prior to termination of the funding commitment (which has not been terminated and cannot be without Treasury's consent) "only to the extent of (i) accrued and unpaid dividends previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference and (ii) Periodic Commitment Fees previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference."
16) "In other words: no minimum per HERA." is wrong. Go read 12 USC 4612, especially (a)(1). At one point you provided a link to HERA, but you don't seem to realize that HERA wasn't a law created out of whole cloth, but instead made many changes to the Safety and Soundness Act of 1992. Many parts of that 1992 Act were left unchanged by HERA, including the minimum capital requirement of 2.5% of balance sheet assets (see Section 1362(a)(1) on page 304). So again you are either confused or being intentionally misleading by only looking at HERA and not also the Safety and Soundness Act of 1992.

Hopefully #13 and #16 together will finally convince you of the truth that the stress test results don't actually matter at all when it comes to regulatory capital levels and leaving conservatorship.



Accusers of spreading false information really shouldn't live in glass houses. And your house, sir, could be shattered by the breath of a kitten.