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IS THIS A MISTAKE? From Etrade.
Extended Hours
Last Price
3.64
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-0.40(-9.90%)
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500
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1.00x100
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Real Time EH Quote. Last Trade as of 07:50:34 PM ET 02/24/14
The market is weird. Every time one guy sells, another one buys, and they both think they're smart.”
Some one said something not nice about BLUE earlier and that is not right the only reason I am here is because of BLUE'S DD back in 2012 which to me is the best.
YOU ARE WELCOME.
[LETTER FROM THE CEO
Home.
It is a word that can mean very different things to different people. For homeowners and renters, perhaps it is a place to raise a family. For those who build or invest in housing, it can be a career or a way to improve the local community. For those without a home, it might be the dream of a safe, warm place to live.
Whatever “home” means to you, Fannie Mae is committed to making it possible.
In our role in the mortgage market, we provide affordable, large-scale access to housing in America. We do this by buying the loans that banks and other lenders originate so they have the funds to issue new loans, which enables more people across the country to buy, refinance, or rent a home. This process helps create stability in the housing market and attracts global capital to America. For the individual, it means affordable mortgage credit is available across the country at all times. For our nation, it means a more stable economy.
We are proud of the role we play in America’s housing finance system. More importantly, we are improving the way we perform that role in order to meet the needs of an ever-changing market. Fannie Mae today is different than it was in the past. In the last five years, we have supported the housing recovery, strengthened our company, and improved the way we and industry partners do business. We are working to fix the defects of the old system and we are helping to build a safer, more sustainable housing finance system for the future. In 2013, we continued to see our progress against these priorities.
Our financial performance has improved significantly during the past few years. In 2013, we reported $84.0 billion in net income and $38.6 billion in pre-tax income, the highest annual income and annual pre-tax income in our company’s history. The fourth quarter of 2013 marked our eighth consecutive quarterly profit, and we expect to be profitable for the foreseeable future. We expect our annual earnings to remain strong over the next few years, but substantially lower than in 2013.
Fannie Mae's profits go back to taxpayers. We will have paid a total of $121.1 billion in dividends to Treasury as of March 2014, which is approximately $5 billion more than we have received in taxpayer support.
Additionally, we have strengthened our underwriting and eligibility standards to promote sustainable homeownership and stability in the housing market. Roughly 77 percent of the loans in our $2.9 trillion single-family guaranty book were purchased between 2009 and 2013, and we expect this new single-family book will be profitable over its lifetime. Our multifamily credit book also continues to perform well – as it did throughout the credit crisis – with extremely low delinquency rates.
We also have helped people keep their homes or otherwise avoid foreclosure by completing more than 1.5 million workout solutions since 2009. In 2013, we completed 234,000 foreclosure prevention solutions. Less than 1 percent of the single-family loans in our book went into foreclosure in 2013, and we strive to help every at-risk family find an alternative to foreclosure.
We have made significant progress in improving our business and we remain committed to working with FHFA to meet its strategic goals for our conservatorship. We are seeing the results of our efforts to build a strong new book of business and we continue to work on our goal of improving the nation's housing finance system, to make it safer and more transparent for consumers, lenders, and investors. We are passionate about this. We know that when the market works well, communities across our country prosper. That is why “home” is better when Fannie Mae is part of it.
In the pages of this report, we share our progress and the evidence of our dedication to support the recovery, improve our company, and make housing better.
Timothy J. Mayopoulos
President and Chief Executive Officer, Fannie Maeb]
http://www.fanniemae.com/portal/about-us/company-overview/fm-leadership.html
I AM NOT SURPRISE SHE IS GOING WHERE SHE CAME FROM AND WHERE IT SHOULD BE.
3.91now
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
3.72
Today's Change
+0.14(+3.91%)
Volume
16,221,276
Bid (Size)
3.71x85,615
Ask (Size)
3.72x46,498
Day's Range
3.58-3.72
I LOVE IT Federal Housing Finance Agency (FHFA), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) to ensure that loans insured under the new Genworth Master Policy will be eligible for sale to Fannie Mae and Freddie Mac. A key aspect of the new master policy is its clear language on the responsibilities of mortgage insurers, loan originators and servicers.
Genworth USMI Provides New Master Policy Resources to Help Customers Understand Improved Coverage Benefits and Plan for Operational Impacts
11:30 AM ET | PR Newswire
Genworth Mortgage Insurance, the Raleigh, NC-based unit of Genworth Financial Inc. (NYSE: GNW), today released detailed information and resources to help customers make a smooth transition to its new master policy being implemented later this year. The new master policy will improve process transparency, provide clarity of coverage, and offer customers clear steps and timelines for managing claims and resolving disputes. It was developed after extensive consultation with the Federal Housing Finance Agency (FHFA), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) to ensure that loans insured under the new Genworth Master Policy will be eligible for sale to Fannie Mae and Freddie Mac. A key aspect of the new master policy is its clear language on the responsibilities of mortgage insurers, loan originators and servicers. The new master policy also spells out an improved approach to rescissions. Genworth already offers customers relief from rescission concerns (including appraisal valuation) if a borrower makes 36 months of timely payments, and now also will offer rescission relief after a minimum of 12 months of timely borrower payments to customers who agree to have Genworth review and verify information in loan files soon after submission. "The new master policy further strengthens the contribution private mortgage insurance makes to a robust and durable housing finance system," said John Clifford, Genworth MI senior vice president of commercial operations. "We recognize there will be impacts to some customers' established processes, procedures, and systems. Our top priority is to provide resources and support to help customers identify areas that might require their attention, before the new policy takes effect." All mortgage insurers are required to introduce their own version of a new master policy for insured loans to be eligible for sale to Fannie Mae and Freddie Mac. Genworth MI currently expects that the new master policy will be effective no earlier than July 2014, and customers will receive a copy of the new master policy and any endorsements before the effective date. The final effective date will be set based on several factors, including State Insurance Department approvals and coordination with Fannie Mae and Freddie Mac. The effective date will be communicated to customers and posted on the Genworth MI website. The Master Policy Introduction Reference Notes and other resources are available at: http://mortgageinsurance.genworth.com/OurCommitment/MasterPolicyResources.aspx. The web pages give customers access to: -- Sample Master Policy -- Sample Endorsements (Note that some endorsements may require Genworth's prior notification and/or approval before being effective) -- Change Summary (Comprehensive comparison of the existing policy to the new policy, identifying changes, items requiring customer action and implementation considerations) -- Frequently Asked Questions In addition to the resources noted above, Genworth is supporting the master policy release with a series of live webinars with Q&A forums, online recorded training, and a dedicated email address - MasterPolicy2014@Genworth.com - for timely responses to customer questions. Customers also can contact their Account Representative or the ActionCenter(R) (1-800-444-5664) for questions or assistance. About Genworth Financial Genworth Financial, Inc. (NYSE: GNW) is a leading Fortune 500 insurance holding company dedicated to helping people secure their financial lives, families and futures. Genworth has leadership positions in offerings that assist consumers in protecting themselves, investing for the future and planning for retirement -- including life insurance, long term care insurance, and financial protection coverages -- and mortgage insurance that helps consumers achieve home ownership while assisting lenders in managing their risk and capital. Genworth operates through three divisions: U.S. Life Insurance, which includes life insurance, long term care insurance and fixed annuities; Global Mortgage Insurance, containing U.S. Mortgage Insurance and International Mortgage Insurance segments; and the Corporate and Other division, which includes the International Protection and Runoff segments. Products and services are offered through financial intermediaries, advisors, independent distributors and sales specialists. Genworth, headquartered in Richmond, Virginia, traces its roots back to 1871 and became a public company in 2004. For more information, visit genworth.com. From time to time, Genworth releases important information via postings on its corporate website. Accordingly, investors and other interested parties are encouraged to enroll to receive automatic email alerts and Really Simple Syndication (RSS) feeds regarding new postings. Enrollment information is found under the "Investors" section of genworth.com. SOURCE Genworth Financial http://rt.prnewswire.com/rt.gif?NewsItemId=PH71629&Transmission_Id=201402251130PR_N
1. $83,963,000,000
In 2013, Freddie Mac saw its net income hit $84 billion as a result of the success in its business, as well as the previously mentioned gains on its credit portfolio and a massive gain from the release of its valuation against its deferred tax asset. To put that into context, this total of $84 billion in net income was more than Wells Fargo (NYSE: WFC ) , Bank of America (NYSE: BAC ) , Citigroup (NYSE: C ) , and JPMorgan Chase (NYSE: JPM ) combined:
Big time.
Hedge Fund Takes $1.3 Billion Position in Fannie Mae and Freddie Mac
http://www.fool.com/investing/general/2014/02/22/hedge-fund-takes-13-billion-position-in-fannie-mae.aspx
NY TIMES Fed to Publish Transcripts of 2008 Meetings
[/http://www.nytimes.com/2014/02/22/business/federal-reserve-2008-transcripts.html?partner=yahoofinance&_r=0b]
NO PRE OR AFTER IN OTC WELL MAYBE NOT TODAY FRIENDS NEED SHEAP SHARES WHAT A DOUBLE DESGRACIA
Fannie earns $6.5B in 4Q; repaying US bailout
http://finance.yahoo.com/news/fannie-earns-6-5b-4q-130002054.html
I LOVE THIS NEWS COMING OUT
[After its latest dividend payment, Fannie Mae will have sent the Treasury a total of $121.1 billion, compared with the $116.1 billion of federal aid it received. The U.S. also has a $1 billion “liquidation preference” in Fannie Mae stemming from the initial $1 billion in senior preferred stock the Treasury obtained in 2008, which the company counts as part of the total aid package.
http://www.bloomberg.com/news/2014-02-21/fannie-mae-to-pay-u-s-7-2-bln-after-quarterly-profit.html?cmpid=yhoo/b]
NEWS NEWS NEWS
Today
FNMA
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE Files SEC form 8-K, Results of Operations and Financial Condition EDGAR Online07:34am EST
FNMA
Fannie Mae Reports Comprehensive Income of $84.8 Billion for 2013 and $6.6 Billion for Fourth Quarter 2013 PR Newswire07:30am EST
FNMA
FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE Files SEC form 10-K, Annual Report EDGAR Online07:23am EST
[By Matt Koppenheffer and David Hanson | More Articles
February 20, 2014 | Comments (0)
As an investor, it's always important to understand both sides of the investing story. Great investors seek out what they may be missing in their thesis. But which well-known hedge fund manager would you not want to be betting against?
In this segment of The Motley Fool's financials-focused show, Where the Money Is, banking analysts Matt Koppenheffer and David Hanson give their dreaded adversaries. David highlights why he wouldn't want to bet against Bruce Berkowitz because of the detailed research his team has historically prepared, such as their work on Fannie Mae (NASDAQOTCBB: FNMA ) , Freddie Mac (NASDAQOTCBB: FMCC ) , and AIG (NYSE: AIG ) . Matt gives his reason for being wary of disagreeing with George Soros./b]
http://www.fool.com/investing/general/2014/02/20/the-last-hedge-fund-manager-to-bet-against.aspx
Patience is a virtue.
Fannie Mae Prices $1.23 Billion Multifamily DUS REMIC (FNA 2014-M2) Under Its Fannie Mae GeMS™ Program
Date : 02/19/2014 @ 12:52PM
Source : PR Newswire (US)
Stock : Fannie Mae (QB) (FNMA)
Quote : 3.26 0.14 (4.49%) @ 12:52PM
767 MILLIONS COMING IN Lehman's former bankruptcy judge, James Peck, had ordered Lehman to set aside $5 billion for the Fannie and Freddie claims when he approved a liquidation plan in late 2011. Because the settlements were for far less than what was set aside, other creditors should get more back. The settlements are different in some respects: Freddie will get a onetime cash payment of $767 million,
THANKS
I LOVE IT.
ABOUT 587,250
b]Last Price
3.28
Today's Change
+0.16(+5.13%)
Volume
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Bid (Size)
3.27x587,250
Ask (Size)
3.28x17,000
Day's Range
3.13-3.29
I LOVE IT.
Greystone Expands California Multifamily Lending Presence with Addition of Matt Stevens in San DiegoFont
8:30 AM ET 2/18/14 | BusinessWire
Greystone, a leading national provider of multifamily and healthcare mortgage loans, today announced the addition of Matt Stevens to the firm's production team. As a Director, Mr. Stevens will focus on origination for debt-financing solutions across Fannie Mae, Freddie Mac, FHA, CMBS, as well as Greystone's proprietary lending platforms.
Mr. Stevens brings to Greystone over 15 years of commercial lending and banking experience, and will report to Rick Wolf, Senior Managing Director and head of Greystone's West Coast production. Previously, Matt was with Alliant/ACRE Capital where he focused on loan originations in California, Nevada, Utah, Colorado, Oregon, Arizona, Missouri, New Mexico and Texas. Matt has also served as a mortgage broker at Churchill Mortgage Capital where he represented leading life insurance companies. At Churchill, Matt specialized in office, retail and self-storage, and originated loans with leading CMBS lenders and regional banks in the area.
"Matt's multi-platform expertise is a perfect complement to the breadth and depth of multifamily and healthcare mortgage lending services Greystone provides out of California," said Wolf.
In 2012, Matt was the leading producer for Alliant/ACRE in Small Loan originations and the only producer to originate loans across a combination of the Fannie Mae, FHA and CMBS platforms. For the past 18 years, Mr. Stevens has also served as an award-winning radio color analyst for UCLA Football.
Greystone provides mortgage finance solutions across multiple platforms, including FHA, Fannie Mae, Freddie Mac, USDA, CMBS, bridge, mezzanine and other proprietary loan programs. In 2013, Greystone was ranked #1 in combined multifamily and healthcare FHA lending, ranked #1 in Small Loans and #3 in Affordable Housing as a Fannie Mae DUS lender in 2013, and is a top-5 Freddie Mac lender for seniors housing.
About Greystone
Greystone is a financial services and private investment group whose original core business is multifamily real estate lending. Over the years, Greystone has added business lines that are related to, and natural extensions of, its core business. Headquartered in New York with offices across the U.S., Greystone is active in three major business segments: Mortgage Finance, Healthcare and Real Estate. Greystone's mission is to apply unparalleled creativity while modeling corporate compassion. Loans are offered through Greystone Servicing Corporation, Inc., Greystone Funding Corporation and/or other Greystone affiliates. For more information, please visit www.greyco.com.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20140218005153r1&sid=cmtx6&distro=nx
SOURCE: Greystone
PRESS:
Greystone
Karen Marotta, 212-896-9149
PR Manager
KMarotta@GreyCo.com
[/Fannie Mae/Freddie Mac Shareholders Publicize Suit against Federal Taking of Assets Submitted by Carl Horowitz on Mon, 02/17/2014 - 18:08
Fannie Mae and Freddie Mac formally are known as Government-Sponsored Enterprises, or GSEs. These days the "S" might stand for "stolen." A group of their shareholders are arguing as much in federal court in Perry Capital v. Lew. The U.S. Treasury, claim the plaintiffs, overstepped its authority by impounding profits in perpetuity through its "sweep" rule of 2012. On Wednesday, February 5, the group, Shareholder Respect, held a conference in Washington, D.C. to highlight its view that the rule violates the terms of the temporary conservatorship under which Fannie Mae and Freddie Mac have been forced to operate since 2008. Ralph Nader, through his group Public Citizen, organized the event. Speakers included the shareholders' lawyer, former Solicitor General Theodore Olson. Anyone concerned over the future of property rights in this country should be following this case.
The Washington, D.C.-based Federal National Mortgage Association ("Fannie Mae") and the McLean, Va.-based Federal Home Loan Mortgage Corporation ("Freddie Mac") are secondary mortgage lenders. That is, instead of making loans to homebuyers, which is what banks, savings & loan associations and other primary lenders do, these companies buy existing loans from primary lenders and either hold them for investment purposes or eventually (as in most cases) package them into pools of marketable bonds, also known as mortgage-backed securities, to institutional investors. Fannie Mae and Freddie Mac's charters from Congress, respectively, in 1968 and 1970, Fannie Mae and Freddie Mac specify a mission: provide liquidity to promote homeownership. These corporations, in effect, are middlemen who connect mortgage and capital markets. In theory, it's a win-win-win arrangement. Primary lenders can unload unproductive long-term loans languishing on their books and get cash in return; institutional and individual investors can derive a decent and safe yield on a reliable financial product; and homebuyers can realize somewhat lower interest rates. And the arrangement worked - for several decades.
The seeds of instability lay in these firms' Government-Sponsored Enterprise status. Fannie Mae and Freddie Mac, by law, are required to expand homeownership opportunities across a wide range of the American population. Toward that end, they long enjoyed advantages over competitors, such as access to a line of credit from the U.S. Treasury and exemption from state and local taxes. While not formally backed by the federal government in the manner of U.S. Treasury bills or FDIC-insured bank accounts, these firms did constitute a government-sponsored duopoly in the service of a congressionally-chartered set of goals. For this reason, they were assumed to be "too big to fail."
Protection from economic failure, unfortunately, also has meant exposure to political pressure and capture. Builders, bankers, community activist groups, financial brokerages, civil rights groups and other interest groups each have had a stake in boosting loan volumes and securitizing loans. This promotion of homeownership, insulated from ill consequences, led to the Great Mortgage Bubble of 2002-07. Back in 1980, Fannie Mae and Freddie Mac had bought a combined 7 percent of all newly-originated long-term residential mortgages. Within 30 years, this figure had soared to 70 percent. By that latter point, they held or guaranteed mortgages worth at least $5 trillion. When house prices were rising, the problem could be camouflaged because the homes served as collateral. But when prices fell - and they fell hard starting in 2007 and even harder in 2008 - investors in Fannie Mae and Freddie Mac bonds, here and abroad, faced a wipeout. Neither company was sufficiently capitalized to handle the potential flood of claims.
Contrary to popular misconception, Fannie Mae and Freddie Mac were not at the leading edge of the mortgage boom. They got aboard after primary lenders dramatically stepped up their lending to borderline or unqualified borrowers. And when they did raise their high-risk activity, they had the good sense to avoid subprime loans. Yet the other part of the story was that it wasn't just the prospect of business opportunities that brought these companies to the game. Congress, the Clinton and Bush administrations, and a host of community groups, starting about 20 years ago aggressively escalated the pressure on Fannie Mae and Freddie Mac to demonstrate their commitment to "affordable" housing. The Clinton administration, for example, required that Freddie Mac devote at least 21 percent of mortgage purchases be in "underserved areas" - that is, "low-income Census tracts or...low- or middle-income Census tracts with high minority populations." The Bush administration, rather than eliminate or at least lower this quota, raised it to 39 percent. As a result of such mandates, Fannie Mae and Freddie Mac were forced to lower their standards of acceptable risk. In the process, banks and/or nonbank subsidiaries were encouraged to loosen their own standards. After all, these two companies were too big to fail. What harm as a result could occur to primary lenders?
As it turned out, plenty of harm occurred. The mortgage bubble burst during the second half of 2008, leaving Fannie Mae and Freddie Mac dangerously undercapitalized and their bondholders at the mercy of nonpaying homeowners. Institutional investors got slammed. Bear Stearns, which had invested heavily in mortgage bonds, already had collapsed earlier in the year. In response, Congress, under pressure from the Bush administration, passed the Housing and Economic Recovery Act (HERA) that July, which President Bush quickly signed into law. This emergency measure, among other things, created an independent entity, the Federal Housing Finance Agency (FHFA), to replace the existing Fannie Mae/Freddie Mac regulator, HUD's Office of Federal Housing Enterprise Oversight (OFHEO). FHFA would be armed with far more authority than its predecessor. For one thing, it would establish tougher minimum capitalization requirements. For another, it would have the power to place Fannie Mae and Freddie Mac under conservatorship or, if necessity warranted, receivership. As a concession to community group networks, the new agency would be required to extract 0.42 percent of new Fannie Mae/Freddie Mac revenues and route the money to a National Housing Trust Fund. The legislation paved the way for a takeover. Financial titans Merrill Lynch and Lehman Brothers by now also were on the brink of collapse.
On September 7, 2008, then-FHFA Director James Lockhart, with "encouragement" from Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson, seized Fannie Mae and Freddie Mac, and placed them under conservatorship. A temporary measure, conservatorship would force the GSEs to repay bondholders in a timely manner while still allowing the companies to continue to operate. The Treasury Department provided the companies with nearly $188 billion - $117 billion to Fannie Mae and $71 billion to Freddie Mac - paid for by the department's acquisition of senior preferred GSE stock worth 79.9 percent of shareholder equity. The government paid a nominal price of $0.00001 per share. The terms were exceedingly strict. Neither company would have any opportunity to buy back shares in the future. And they had to forward all dividends, set at a very high 10 percent rate, directly to the Treasury as repayment of the debt.
The agreement, in other words, protected bondholders but left shareholders in the lurch. Indeed, the arrangement was much more severe than that the General Motors bailout, which at least allowed for resumption of normal operations if and when the federal government sold off its GM stake. Fannie Mae and Freddie Mae were on a very short leash. And it would get shorter still in 2012, ironically, with a markedly improved housing market. By then, the proportion of mortgaged homes whose debt exceeded market value ("underwater"), was peaking. House prices, as measured by the Standard & Poor's/Case Shiller Housing Index of single-family detached dwellings in 20 selected metro areas, were registering annualized increases in excess of 10 percent. The Federal Reserve System had embarked on a "quantitative easing" strategy to stimulate the economy, buying $85 billion worth of bonds a month. Of that sum, $45 billion would go for Treasury bonds and the other $40 billion would go for Fannie Mae/Freddie Mac mortgage-backed securities. And thanks to the unleashing of pent-up demand, the GSEs had become profitable again. "Housing is back," Fortune magazine had declared the previous year.
The U.S. Treasury Department sensed as much. Recognizing an opportunity to accelerate its debt collection from Fannie Mae and Freddie Mac, the department on August 7, 2012 imposed a new rule known as the "sweep amendment," or "Amendment Three," that would supersede the 10 percent dividend rule. The sweep rule, which went into effect last year, authorized the U.S. Treasury to seize all future quarterly profits from stock. Fannie Mae and Freddie Mac, though making good progress in paying their debts, now were little more than government agencies bearing a corporate logo. Company stock now was worthless.
A sizable number of shareholders, stunned, decided to fight back. Arguably the most important among them were holders of Fannie Mae/Freddie Mac mortgage bonds under the management of a New York-based hedge fund, Perry Capital LLC. On July 6, 2013, Perry Capital, acting on behalf of shareholders, filed suit against Treasury Secretary Jack Lew in the District of Columbia federal court alleging that the Sweep Rule was unauthorized. The suit also accused the Federal Housing Finance Agency of reneging on its conservatorship by not challenging the department. The plaintiffs hired Theodore Olson, Solicitor General during most of the first George W. Bush administration and now back at his old law firm of Gibson, Dunn & Crutcher, to represent them. The lawsuit seeks no monetary damages. It simply requests that the government abide by the authority granted to it by the 2008 HERA law.
The shareholders also have conducted a campaign in the court of public opinion via an ad hoc group, Shareholder Respect. And they have a key ally in their corner in attorney, consumer advocate and former presidential candidate Ralph Nader. At first glance, the partnership might seem like a poor fit. Nader for decades has been an acerbic critic of corporate conduct. Yet he is hardly a friend of the federal government. Moreover, he senses that Shareholder Respect, whose investors represent a wide range of household wealth and income, have a legitimate grievance. The Obama administration acted arbitrarily in forcibly liquidating Fannie Mae and Freddie Mac assets. If unchallenged, Nader argues, such action could be replicated against shareholders of any number of publicly-traded U.S. companies.
Federal officials, for their part, maintain that the shareholders have no legal standing. In filing a motion last December to dismiss the case, the Treasury Department argued that it hadn't deprived investors of a return. The Sweep Rule, argued government lawyers, was instituted because of well-founded concerns that Fannie Mae and Freddie Mac might exhaust their federal aid prior to repaying their debt, which would have triggered an outright receivership. As the rule does not require any dividend payments to be made in the event the corporations lose money, this precautionary measure did not seek to deprive shareholders of income. In a response to the plaintiffs last month, government lawyers explained: "Treasury committed and provided hundreds of billions of dollars to rescue the entities. Having gained that benefit, the shareholders cannot credibly claim that the (Constitution) demands that Treasury compensate them further for their investment." The government points out that Fannie Mae and Freddie Mac sent combined $130 billion to the Treasury in 2013, a sum nearly seven times that which would have been sent had the Sweep Rule not been issued.
But this amounts to a specious rationale. It assumes that the government has the authority to use whatever method it deems fit to hasten the collection of a debt, even one repaid in a timely manner. Even private-sector bill collectors can't browbeat debtors or garnish their wages on a whim; they have to adhere to the Fair Debt Collection Practices Act. Worse, it likely was the government's intent well before the Sweep Rule to deprive shareholders of profits. In a memo dated December 20, 2010, then-Treasury Undersecretary for Domestic Finance Jeffrey Goldstein conveyed his view to then-Treasury Secretary Timothy Geithner that "the administration's commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.'s in the future." Lawyers for the plaintiffs in the Perry case have produced this memo as evidence of a violation of federal securities law, which requires disclosure of material information to shareholders.
In effect, the Treasury Department, with the complicity of FHFA and other federal agencies, have operated under the assumption that shareholder rights are null and void simply because the companies in which they hold shares are under conservatorship. The government would seem to have a weak case. Yet even if the shareholders win, they face a long road ahead in getting back their investments. David Felt, former FHFA Deputy General Counsel for Conservatorships, recently remarked: "If investors are going to get any money out of this, it's going to come out of the courts, and it's going to take years.
Compensating shareholders, rich or otherwise, is the central issue, born of high principle. Nader hasn't been mincing words these past several months. He had this to say in the following Shareholder Respect statement ("Fannie and Freddie Shareholders - The Forgotten, Used and Abused, Silenced Constituency") issued last November 22:
The federal government - the Treasury, FHFA, and Congress - exploited and ignored the GSEs' shareholders with zombie stock, and stuck them in financial limbo. The GSEs were required to pay above-market 10 percent dividends on Treasury's investment, while many of the Wall Street banks that were bailed out with TARP money were required to pay dividends half of that rate. The shareholders of their bailed-out banks were preserved and given a chance to recover.
The FHFA ordered the Fannie and Freddie boards and executives to suspend communications with shareholders and abolish annual shareholder meetings. And finally, adding insult to injury, in 2010 the FHFA arbitrarily directed Fannie and Freddie to initiate and delisting of their common and preferred stock from the NYSE. This further degraded shareholder value and chased away many institutional investors.
In 2012, as Fannie Mae and Freddie Mac were returning to profitability despite financial and operating restrictions on their activities, the U.S. Treasury changed the terms of its investment in the GSEs to its own benefit. The Treasury replaced the already well-above-market 10 percent that the GSEs were paying to a "sweep" of all the profits of the companies.
This was the context of the conference held on Wednesday morning, February 5, at the Carnegie Institution for Science, located in downtown Washington, D.C. Shareholder Respect sought to dramatize its case, and more generally, the threat to property rights posed by the sweep rule. Leaders convened a panel of eight experts before an audience to discuss particular aspects of Perry Capital and other GSE shareholder cases (e.g., Fairholme Funds Inc., which, unlike Perry, is seeking damages), and how Fannie Mae and Freddie Mac shareholders can assert their rights. Current proposals in Congress - in the Senate by Bob Corker, R-Tenn., and Mark Warner, D-Va., (S.1217) and in the House by Jeb Hensarling, R-Tex. (H.R. 2767) - would abolish the two companies and replace them with a bank-influenced insurance-based system. Yet they fail to address shareholder grievances. The panelists, representing a spectrum of political views, were: Ralph Nader; Theodore Olson; James Glassman, fellow, American Enterprise Institute (and panel moderator); John Taylor, president, National Community Reinvestment Coalition; Ed Mierzwinski, consumer program director, U.S. PIRG; Sheila Crowley, president, National Low Income Housing Coalition; investor Tim Pagliara; and David Berenbaum, chief program officer, National Community Reinvestment Coalition.
The keynote speaker was former Solicitor General Theodore Olson, representing the plaintiffs. After briefly summarizing the case, Olson declared: "It is the official position of the government to deprive shareholders of all gains." He then gave three reasons why the Sweep Rule is illegal. First, the 2008 legislation that created FHFA requires that agency to conserve assets, not to keep them. Second, the Treasury Department violated its own terms by changing the rules after the 2009 deadline had passed. And third, the rule precludes all private ownership of Fannie Mae and Freddie Mac, effectively nationalizing assets. Put simply, Olson said, this is a case of legalized theft, one that sets a dangerous precedent for business everywhere in this country.
Other panelists made their criticisms known. James Glassman focused on the effect of the Treasury Department action on the rule of law. The sweep rule, he said, has laid the groundwork for mistrust of the law and of the safety of investments. People won't buy property or otherwise invest unless they are certain that the rules won't be arbitrarily changed to their detriment. This, he added, is the very purpose of the Takings Clause. Tim Pagliara, chairman and CEO of the Nashville-based CapWealth Advisors LLC, noted that he probably is the only person to have spoken with Senator Corker (R-Tenn.) on the issue of theft from shareholders. He stated the Corker-Warner legislation is a bad bill. It would keep people uninformed and would result in costlier mortgages, especially when Basel III banking rules take effect. The other speakers, all on the Left, were less persuasive. They chose to focus on the necessity of maintaining, if not expanding, mandatory affordable housing goals for Fannie Mae/Freddie Mac. Apparently, they cannot grasp that applying the affirmative action principle to the mortgage industry, in ways direct and indirect, helped bring about the GSEs' imminent collapse back in 2008. Still, one can be grateful for their support. Getting to choose allies is a luxury that only occasionally presents itself. Typically, circumstances dictate alignments. Politics - effective politics, at any rate - really does make for strange bedfellows.
As for the prime organizer of the show, Ralph Nader, about to turn 80, he remains a man of the Left. In other words, he's not the sort of person with whom the National Legal and Policy Center often agrees. Yet he is an authentic populist, one of the few people out there capable of uniting strands of Right and Left discontent into a broad program. His forthcoming book, "Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State" (Current Affairs), discusses the possibilities for creating an effective counterweight to unchecked centralized power. It's certainly worth a read.
The Perry case ought to be a focal point of this discontent. Evidence strongly suggests the Sweep Rule is illegal. While the regulation has accelerated repayment of Fannie Mae/Freddie Mac debt, it has done so by creating a license to steal. And with that debt now virtually retired, the main issue should be how to restore the autonomy of these companies and their shareholders - and without the guarantee of a federal lifeline. Conservatorship never was intended as a permanent arrangement. Yet that is what it has become. The Obama administration prefers it that way insofar as it enables the government to pay off its own debts. A shareholder win would be a clear victory for public accountability and property rights. Less
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