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Hamish Hume
Counsel of Record
The lawyers brought the wrong lawsuit before the SCOTUS, using the contract SPSPA, the lawyers should have brought the LAW WRITTEN IN HERA. But it doesn’t change the fact lawyer Hume gave us the numbers.
In the Supreme Court of the United States
Quote: "In August 2012, FHFA and Treasury changed the PSPA dividend on Treasury’s senior preferred stock from 10% of the stock’s principal value to 100% of the net worth of Fannie Mae or Freddie Mac (minus a small reserve that would shrink to zero by 2018), in perpetuity. Under this arrangement, private shareholders in Fannie and Freddie could never receive any dividends no matter how much money they earned, as 100% of all dividends would have to be paid to Treasury. As a result, Treasury has taken roughly $150 billion more than it could have received under the original 10% dividend." End of Quote
https://www.supremecourt.gov/DocketPDF/22/22-98/230704/20220722162334690_Petition%20for%20Writ%20Of%20Certiorari.pdf
Your argument doesn’t work anymore, we see right through your smoke and mirrors.
The problem with Professor Epstein his evaluation focused on the contract SPSPA between two government agencies. All he had to do was to apply the LAW WRITTEN IN HERA: with that being said doesn’t change the fact in what the Professor wrote is the ABSOLUTE TRUTH.
According to Professor Richard Epstein
The Senior Preferred Stock would have been redeemed.
Quote “The conflict of interest took a more ominous turn with the adoption of the Third Amendment between FHFA and Treasury nearly four years later. At that time, the market had quieted down, and the GSEs were making timely dividend payments on Treasury’s preferred stock. Nonetheless, FHFA and Treasury ripped up the old agreement, and substituted in its place a new deal that created a “net worth sweep” whereby all of the funds received by the GSEs were paid over to Treasury as a dividend, even in amounts far in excess of the original 10 percent dividend. The consequences have been huge. Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed. With the Third Amendment, about $128 billion that could have been used to redeem the preferred shares has been reclassified as a dividend payment, rather than a return of capital.” End of Quote
Please Note: “Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed.”
Link: https://ricochet.com/326448/fannie-freddie-fiasco/
DaJester, Thank you Sir…
DaJester Quote: “ This isn't quite right either. The Supreme Court said there's nothing unconstitutional to implement the NWS. Just like the govt can take your house away legally, they can also take a business or the assets of the business. There' nothing to legally prevent the NWS even if it's never been done before. That doesn't mean there doesn't need to be compensation for takings.” End of Quote
The SCOTUS upholding the NWS does not change the fact the LP can be paid down and the SPS redeemed under the terms of the LAW OF HERA. The money kept by the Treasury by the NWS should be applied to principle and 10% interest and over payment should be returned to the companies. $301 billion is more than enough to pay the LP and redeem the SPS. Secondary IPO replaces the commitment.
This is the argument of the Cram Down People, they reference the
The Senior Preferred Stock Purchase Agreement Optional Pay Down of Liquidation Preference Following termination of the Commitment.
Quote: “The companies can't terminate the commitment anyway no matter what without Treasury's approval. The funding commitment doesn't have anything to do with the NWS. The funding commitment came into existence when the original SPSPAs were signed in 2008.” End of Quote. WRONG!
The Senior Preferred Stock Purchase Agreement is an illegal contract.
The LAW
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
Explained: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172666360
The cram down makes the counterfeit shares disappear. Makes me ask ‘Who do the cram down people work for?? And why are they pushing the cram down so hard??’
TRADING FLOOR OF THE MARKET-MAKER:
The primary market-makers in these GSE's are Goldman Sachs (Fannie Mae) and LaBranche & Co. (Freddie Mac). These are the specialists on the NYSE where the GSE's are listed, thus all trades executed on the NYSE in the GSE's must flow through these market-makers.
Quote: “Without the counterfeiting of the GSEs shares and the concerted effort to manipulate the stock prices, the GSEs potential to raise significant capital would have been much greater and it is unlikely that the U.S. Taxpayers would be the conservators of these companies at this time.
This report shows why this is true and that illegal sellers of the shares of the two GSEs made a vast sum of money taking down these companies to the detriment of the U.S. Citizens. This report names who the key market participants are in the trading of the GSEs.” End of Quote.
https://www.sec.gov/comments/s7-08-09/s70809-407a.pdf
kthomp, let’s look past the SPSPA ‘The Contract’ between two government agencies.
THE LAW OF THE LAND HERA
The FHFA Director can at any time, REPURCHASE, REDEEM, RETIRE... First the Senior Preferred Stock and second the Junior Preferred Stock.
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
kthomp, do you work for the Market Maker?
KT Quote: “ One single flaw: that the FHFA director could only be removed for cause. The Supreme Court fixed this by saying that the President can now remove the FHFA director at will. Now HERA is 100% constitutional.” End of Quote
ewtrader, From what I understand the agency is not unconstitutional now. The serious problem is the FHFA Regulator breaking the law.
Vancmike, the amount own greater than 50%
Barron Quote: “Whether or not they explicitly guarantee doesnt determine if they can avoid putting the liabilities on the nations balance sheet. The Treasury used appropriations to provide a $200 billion commitment, own greater than 50% of the GSEs, and asserted non regulatory control of the GSEs through the SPSPAs. These are the 3 conditions listed under FSAB for consolidation. Only one of which is necessary to require Treasury to consolidate. Treasury has met all 3 since 2008, and has chosen to break federal law thereby resulting in the Treasury unconstitutionally repudiating the nations debt. Those 3 criteria show a complete nationalizing of the GSEs. The fact the shares still trade is a giant securities fraud” End of Quote
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=171432357
Absolutely!
Charter Act SEC. 304. SECONDARY MARKET OPERATIONS
(c) Terms and Rates
Quote: “All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this subsection SHALL BE TREATED AS PUBLIC DEBT TRANSACTIONS of the United States.” End of Quote Page 14
The CFO act requires the Treasury department based on published accounting standards to determine if their actions of funding through appropriations, ownership of 100% of the GSEs net worth and non-regulatory control of the GSEs through the SPSPA require the consolidation of the GSEs liabilities onto the nations balance sheet. Do the actions of Treasury under the SPSPA require such consolidation under the plain language of the Chief Financial Officers Act?
The Congressional Budget Office publication states, “Federal Government effective ownership of Fannie Mae and Freddie Mac.”
The Enterprises have been Nationalized by the Government according to the CBO: The liabilities have not been added to the National Debt nor have the Shareholders been compensated by U.S. Law of the 5th Amendment.
Congressional Budget Office
From: Estimates of the Cost of Federal Credit Programs in 2023
Page 1, Foot Note 1.
Quote: “Fannie Mae and Freddie Mac have been in federal conservatorship since September 2008. CBO treats the two GSEs as government entities in its budget estimates because, under the terms of the conservatorships, the federal government retains operational control and effective ownership of Fannie Mae and Freddie Mac. For more discussion, see Congressional Budget Office, Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions (August 2020), www.cbo.gov/publication/56496; and Congressional Budget Office, The Effects of Increasing Fannie Mae’s and Freddie Mac’s Capital (October 2016), www.cbo.gov/ publication/52089” End of Quote
Link: https://www.cbo.gov/system/files/2022-06/58031-Federal-Credit-Programs.pdf
The United States Treasury in violation of the Charter Act has failed to treat as public debt the transactions of the United States when the FHFA placed Fannie Mae and Freddie Mac into conservatorship. This obligation was never recorded as public debt as required by law.
The Charter Act the Law of the Land.
Charter Act SEC. 304. SECONDARY MARKET OPERATIONS
(c) Terms and Rates
Quote: “All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this subsection SHALL BE TREATED AS PUBLIC DEBT TRANSACTIONS of the United States.” End of Quote Page 14
Link: https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/aboutus/pdf/fm-amended-charter.pdf
Barron Quote: “What I am saying is that if it is found that the actions of Treasury since 2008 would require that the GSEs be consolidated on the nations balance sheets as required by FASAB, then that would be an actual takings requiring Treasury to also include the mbs liability (trillions) on the nations balance sheet. The result would be that the Treasury’s actions recreated FNMA as an agency of the united states as they were created in 1938. This was not intended by Congress when they amended the charter act under HERA. So this is a major question doctrine case, a constitutional debt clause case, a takings case, and a major questions case. Treasury was told to buy GSE stuff in 2008-2009 to help them out. Not take them over and nationalize them violating all the accounting and budgeting laws of the United States.” End of Quote
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=171242334
https://files.fasab.gov/pdffiles/2022_%20FASAB_%20Handbook.pdf
The real reason for the Cram Down?
LuLeVan said Quote “If the SPS (or LP, or LP - SPS) are converted to commons, the government will receive about $100 billion (99.5 % ownership).”
At 99.5% the counterfeit shares disappear and the Market Makers that created the counterfeit shares are off the hook. Are the ones pushing the cram down working for the Market Makers??
In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard two-day settlement period. As a result, the seller fails to deliver securities to the buyer when delivery is due; this is known as a "failure to deliver" or "fail."
COUNTERFEITING
INFORMATION FROM: U.S. Securities and Exchange Commission web site.
The counterfeiting of U.S. assets. Theft from pension funds, State employee retirement accounts, and U.S. Citizens. The counterfeiting of shares of Fannie Mae and Freddie Mac. Where are our regulators and who are they protecting?
https://www.sec.gov/comments/s7-08-09/s70809-407a.pdf#:~:text=Fannie%20Mae%20and%20Freddie%20Mac%20are%20publicly%20traded,was%20occurring%20in%20the%20trading%20of%20the%20GSEs.
https://www.sec.gov/answers/nakedshortsale
navycmdr, made an excellent point.
ANYONE: What appropriation was afforded the Regulator to give a capital distribution??
What law gave the Regulator the authority to give away the companies' money while the enterprises are undercapitalized??
Cmdr Quote: "so how did FHFA under Calabria "Distribute" $1.09 Billion to the
Affordable Housing TRUST FUND from UNDER Capitalized GSEs?
and FHFA acting director Sandra L. Thompson announced that the
Housing Trust Fund and Capital Magnet Fund will receive a total of
$1.138 billion for affordable housing initiatives from Fannie Mae and Freddie Mac ?
Posted on: February 28, 2022 AFFORDABLE HOUSING FINANCE
FHFA Announces Largest Amounts for Housing Trust Fund and Capital Magnet Fund" End of Quote
To stay within Congressional Law governing the Enterprises the Jury award will have to be collected after the companies are adequately capitalized. IF NOT the FHFA will violate the law yet again just as the FHFA has numerous violations already.
THE LAW
Code of Federal Regulation
1237.12 Capital distributions while in conservatorship.
(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.
(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:
No 1: Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;
No 2: Will contribute to the long-term financial safety and soundness of the regulated entity;
No 3: Is otherwise in the interest of the regulated entity; or
No 4: Is otherwise in the public interest.
Section c, this section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.
DID THE NET WORTH SWEEP
Enhance the ability to meet risk-based capital level? NO
Contribute to the long-term financial safety and soundness of the regulated entity? NO
In the interest of the regulated entity? NO
Is otherwise in the public interest? NO
(The taxpayers are responsible for the liabilities of the enterprises).
The Net Worth Sweep could not possibly have any rehabilitative effect and that one of the principal duties of the FHFA Director is to preserve and conserve assets.
Fannie is allowed to retain its earnings until it fully meets its applicable risk-based capital requirement (it’s currently short by $247.8 billion), but those increased retained earnings are matched by a dollar-for-dollar increase in Treasury’s liquidation preference.
https://gov.ecfr.gov/current/title-12/chapter-XII/subchapter-B/part-1237/subpart-D/section-1237.12
Fannie Mae and Freddie Mac sent tons and tons of money to the Treasury Department above the 10% Dividend.
The Net Worth Sweep!
When all the money was swept into the dark hole of the Treasury nothing left over to pay down the Liquidation Preference, redeem the Senior Preferred Stock. The Companies could have applied the overage of the 10% to the pay down and turned to the Equity Market Secondary IPO and the commitment from the Treasury would have been of no value. No need for the Treasury to continue the commitment.
DaJester, if the lawyers would apply the law maybe we can get out of this prison.
This is the argument of the Cram Down People, they reference the
The Senior Preferred Stock Purchase Agreement Optional Pay Down of Liquidation Preference Following termination of the Commitment.
Quote: “The companies can't terminate the commitment anyway no matter what without Treasury's approval. The funding commitment doesn't have anything to do with the NWS. The funding commitment came into existence when the original SPSPAs were signed in 2008.” End of Quote.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
THE LAW THE REGULATOR DOES NOT NEED TREASURY’S APPROVAL.
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
Explained: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172666360
The FHFA / Treasury continue to change the contract, letter agreement dated January 14, 2021, So, the Statute of Limitations are not up. PAGE 6 Liquidation Preference increases dollar for dollar for all the retained earnings of the enterprises.
https://home.treasury.gov/system/files/136/Executed-Letter-Agreement-for-Fannie-Mae.pdf
Barron Quote: "Statute of limitations would rely on DOJ guidance for recurring claims due to material changes introduced in the letter agreements. For example the new increase of liquidation preference for free introduced within the last 6-years." End of Quote
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172340943
Quote: "It is not a law, but at this point any legal challenge made to it would be time-barred by the statute of limitations." End of Quote This statement appears to be not correct. The FHFA / Treasury continue to change the contract, letter agreements. So, the Statute of Limitations are not up.
Kthomp19 said Quote: “ I get it, the way the Supreme Court ruled makes no damn sense to any of us. But it's the reality we have to deal with. Contradicting the Supreme Court is not going to get you very far.” End of Quote
As you also said, Quote: “While this is correct, according to the Supreme Court it doesn't matter.” End of Quote
The Lawyers brought the wrong argument the lawyers focused on the contract FHFA and Treasury signed.
The Senior Preferred Stock Purchase Agreement, Optional Pay Down of Liquidation Preference Following termination of the Commitment. The Senior Preferred Stock Purchase Agreement is a contract not the law.
Bryndon, gave us the calculation of the pay down of the liquidation preference . Now if he will apply the LAW written in HERA.
https://drive.google.com/file/d/15978NWfDcTtuClMBnwgWFmoPnwK94vWn/view
THE LAW
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
Vancmike, News Release: FHFA Announces Suspension of Capital Classifications During Conservatorship.
The FHFA freely with out restriction admitted in the SAME NEW RELEASE both companies were adequately capitalized at the exact same moment the Regulator suspended the capital classifications.
The Suspension of Capital Classifications by the FHFA did not affect the Restriction on Capital Distributions; The FHFA Regulator cannot just up and decide to change the Law.
Minimum Capital
Fannie Mae’s FHFA-directed capital requirement on June 30, 2008 was $37.5 billion and its statutory minimum capital requirement was $32.6 billion. Fannie Mae’s core capital of $47.0 billion exceeded the FHFA-directed capital requirement by $9.4 billion.
Freddie Mac’s FHFA-directed capital requirement on June 30, 2008 was $34.5 billion and its statutory minimum capital requirement was $28.7 billion. Freddie Mac’s core capital of $37.1 billion exceeded the FHFA-directed minimum capital requirement by $2.7 billion.
Risk-Based Capital
As of June 30, 2008, Fannie Mae’s risk-based capital requirement was $36.3 billion. Fannie Mae’s total capital of $55.6 billion on that date exceeded the requirement by $19.3 billion.
As of June 30, 2008, Freddie Mac’s risk-based capital requirement was $20.1 billion. Freddie Mac’s total capital of $42.9 billion on that date exceeded the requirement by $22.8 billion.
THE TAKE DOWN!
Tim Howard Quote: “Fannie and Freddie’s regulatory guidelines [FHEFSSA] would have prohibited them from paying cash dividends while severely undercapitalized, but FHFA suspended those guidelines because it wanted the companies to have to draw more senior preferred stock from Treasury to pay the annual dividends in cash, to balloon their outstanding senior preferred and increase their required annual dividends by still more. It was only after it was obvious that the companies were about to enter a “golden age of profitability” (because of the end and then the reversal of the non-cash expenses put on their books by FHFA), that FHFA and Treasury claimed to be concerned about a “death spiral” of borrowing to pay the senior preferred dividends in cash—and their solution was not the 12 percent annualized accrual of Treasury’s liquidation preference specified in the SPSPAs, but to impose the net worth sweep.” End of Quote
https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Suspension-of-Capital-Classifications-During-Conservatorship-and-Discloses-Minimum-and-RiskBased-Cap.aspx
Stockanalyze, government agencies do not make laws. Congress made the law. FHEFSSA is law. The FHFA / Treasury cannot just up and decide to change the Law.
As pointed out on this board the suspension of capital classifications did not affect the Restriction on Capital Distributions,
To stay within Congressional Law governing the Enterprises the Jury award will have to be collected after the companies are adequately capitalized. IF NOT the FHFA will violate the law yet again just as the FHFA has numerous violations already.
THE LAW
Code of Federal Regulation
1237.12 Capital distributions while in conservatorship.
(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.
(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:
No 1: Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;
No 2: Will contribute to the long-term financial safety and soundness of the regulated entity;
No 3: Is otherwise in the interest of the regulated entity; or
No 4: Is otherwise in the public interest.
Section c, this section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.
DID THE NET WORTH SWEEP
Enchance the ability to meet risk-based capital level? NO
Contribute to the long-term financial safety and soundness of the regulated entity? NO
In the interest of the regulated entity? NO
Is otherwise in the public interest? NO
(The taxpayers are responsible for the liabilities of the enterprises).
The Net Worth Sweep could not possibly have any rehabilitative effect and that one of the principal duties of the FHFA Director is to preserve and conserve assets.
Fannie is allowed to retain its earnings until it fully meets its applicable risk-based capital requirement (it’s currently short by $247.8 billion), but those increased retained earnings are matched by a dollar-for-dollar increase in Treasury’s liquidation preference.
https://gov.ecfr.gov/current/title-12/chapter-XII/subchapter-B/part-1237/subpart-D/section-1237.12
ewtrader, said Quote: “ FHFA due to the improper unconstitutional structure of the federal agency.” End of Quote
Kindly direct us to the unconstitutional structure of FHFA Per Supreme Court ruling. Where is this information written? Thanks
I was under the impression the Director position was unconstitutional by reason the Director could not be removed without cause. But you are saying the Supreme Court ruled the FHFA is unconstitutional structured. ??
That is a good question Sir, what appropriation was afforded the Regulator to give a capital distribution??
Quote: "so how did FHFA under Calabria "Distribute" $1.09 Billion to the
Affordable Housing TRUST FUND from UNDER Capitalized GSEs ?"
Guido2, this is worth repeating what you said my friend.
Quote: "Government agencies don't make laws. That authority rests with Congress. Government agencies are allowed to interpret laws through regulations. FHEFSSA is law and not suspendable by FHFA. In a national emergency, I suppose (not sure) the President could issue an Executive Order to SUSPEND a law. I didn't see George Bush's signature on the SPSPA. I say $301 billion dividends to Treasury is illegal." End of Quote.
The FHFA / Treasury cannot just up and decide to change the Law.
FHFA suspended those guidelines
FHFA suspended those guidelines
FHFA suspended those guidelines
Tim Howard Quote: “You are correct that Fannie and Freddie’s regulatory guidelines [FHEFSSA] would have prohibited them from paying cash dividends while severely undercapitalized, but FHFA suspended those guidelines because it wanted the companies to have to draw more senior preferred stock from Treasury to pay the annual dividends in cash, to balloon their outstanding senior preferred and increase their required annual dividends by still more.” End of Quote
Keep in mind the FHFA is regulator the FHFA cannot change the law.
Link: https://howardonmortgagefinance.com/2023/06/05/response-to-fhfa-pricing-rfi/#comments
It will be distributed out of the cash account of Fannie Mae and Freddie Mac, to pay for damages inflicted by the FHFA.
It will be distributed out of the cash account of Fannie Mae and Freddie Mac, to pay for damages inflicted by the FHFA.
Sir, To stay within Congressional Law governing the Enterprises the Jury award will have to be collected after the companies are adequately capitalized. IF NOT the FHFA will violate the law yet again just as the FHFA has numerous violations already.
THE LAW
Code of Federal Regulation
1237.12 Capital distributions while in conservatorship.
(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.
(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:
No 1: Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;
No 2: Will contribute to the long-term financial safety and soundness of the regulated entity;
No 3: Is otherwise in the interest of the regulated entity; or
No 4: Is otherwise in the public interest.
Section c, this section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.
DID THE NET WORTH SWEEP
Enchance the ability to meet risk-based capital level? NO
Contribute to the long-term financial safety and soundness of the regulated entity? NO
In the interest of the regulated entity? NO
Is otherwise in the public interest? NO
(The taxpayers are responsible for the liabilities of the enterprises).
The Net Worth Sweep could not possibly have any rehabilitative effect and that one of the principal duties of the FHFA Director is to preserve and conserve assets.
Fannie is allowed to retain its earnings until it fully meets its applicable risk-based capital requirement (it’s currently short by $247.8 billion), but those increased retained earnings are matched by a dollar-for-dollar increase in Treasury’s liquidation preference.
https://gov.ecfr.gov/current/title-12/chapter-XII/subchapter-B/part-1237/subpart-D/section-1237.12
Ace, you stated " SCOTUS has found flaws in it each case (with merit) is fighting to get it overturned as it contradicts the constitution in some parts. Slowly but surely each case is chipping away at HERA." End of Quote
Exactly what part of the law in HERA is flawed? I do not see flaws in the law.
My understanding the FHFA is breaking the law.
Vancmike, The below link disappeared from the FHFA website. It was a publication from the FHFA.
The information can be verified by the companies financial statement.
Paulson was unaware that the FHFA had sent both Fannie Mae and Freddie Mac letters saying the companies were safe and sound and exceeded their regulatory capital requirements. Paulson told Lockhart that he had to change his agency’s posture on the two companies, and FHFA did exactly that. FHFA sent each company an extremely harsh mid-year review letter, and two days later, Paulson, Lockhart and Fed chairman Bernanke met with the companies’ CEOs and directors to tell them they had no choice but to agree to conservatorship.
There was no 'Emergency.'
FHFA freely admitted the companies were adequately capitalized, evidence the companies exceeded capital requirements absolutely no need for emergency funding.
SECOND QUARTER CAPITAL RESULTS
Minimum Capital
Fannie Mae’s FHFA-directed capital requirement on June 30, 2008 was $37.5 billion and its statutory minimum capital requirement was $32.6 billion. Fannie Mae’s core capital of $47.0 billion exceeded the FHFA-directed capital requirement by $9.4 billion.
Freddie Mac’s FHFA-directed capital requirement on June 30, 2008 was $34.5 billion and its statutory minimum capital requirement was $28.7 billion. Freddie Mac’s core capital of $37.1 billion exceeded the FHFA-directed minimum capital requirement by $2.7 billion.
Link: https://www.fhfa.gov/mobile/Pages/public-affairs-detail.aspx?PageName=FHFA-Announces-Suspension-of-Capital-Classifications-During-Conservatorship-and-Discloses-Minimum-and-RiskBased-Cap.aspx
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE TUESDAY, JULY 15, 2008
STATEMENT OF HENRY M. PAULSON, JR., SECRETARY, DEPARTMENT OF THE TREASURY
Quote: “Fannie and Freddie play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.” End of Quote Page 6
Quote: “Our proposal was not prompted by any sudden deterioration in conditions at Fannie Mae or Freddie Mac. OFHEO has reaffirmed that both GSEs remain adequately capitalized.” End of Quote Page 6
Quote: “Let me stress that there are no immediate plans to access either the proposed liquidity or the proposed capital backstop. If either of these authorities is used, it would be done so only at Treasury's discretion, under terms and conditions that protect the U.S. taxpayer and are agreed to by both Treasury and the GSE.” End of Quote Page 6
Quote: “As I have said, we support the current shareholder-owned structure of these enterprises. Our plan addresses current market challenges by ensuring, on a temporary basis, access to both liquidity and capital, while also ensuring that the GSEs can fulfill their mission--a mission that remains critical to homeowners and homebuyers across the country, especially during this housing correction.” End of Quote Page 7
Link: https://ypfsresourcelibrary.blob.core.windows.net/fcic/YPFS/Senate-110-1008_2008.pdf
The above to THE UNITED STATES SENATE
” Yet he had a very different private message for Wall Street insiders."
EVIDENCE
Convincing evidence exists that the conservatorships of Fannie Mae and Freddie Mac were planned well in advance, and that they were intended to remove the companies permanently from private ownership.
Quote, “On July 11, the New York Times published a front-page article saying, “Senior Bush administration officials are considering a plan to have the government take over one or both of [Fannie Mae and Freddie Mac] and place them in a conservatorship if their problems worsen.”Shares of the companies plunged, and in response Paulson publicly pledged support for them on July 13, saying, “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.”Yet he had a very different private message for Wall Street insiders. As reported by Bloomberg in November of 2011, Paulson met with a select group of hedge fund managers at Eaton Park Capital Management on July 21, where he told them that Treasury was considering a plan to put Fannie Mae and Freddie Mac into conservatorship, which would effectively wipe out common and preferred shareholders.This, of course, is precisely what happened six weeks later. End of Quote, From “Treasury, the Conservatorships, and Mortgage Reform” January 11, 2015
Treasury, however, lacked authority to put the two companies into conservatorship; only the new regulator, FHFA, could do that. And Treasury had kept neither the old OFHEO nor the new FHFA apprised of its nationalization intentions. Paulson was unaware that the FHFA had sent both Fannie Mae and Freddie Mac letters saying the companies were safe and sound and exceeded their regulatory capital requirements. Paulson told Lockhart that he had to change his agency’s posture on the two companies, and FHFA did exactly that. FHFA sent each company an extremely harsh mid-year review letter, and two days later, Paulson, Lockhart and Fed chairman Bernanke met with the companies’ CEOs and directors to tell them they had no choice but to agree to conservatorship.
When Paulson met with the directors of Fannie Mae and Freddie Mac to inform them of his intent to take over their companies, neither entity met any of the twelve conditions for conservatorship spelled out in the newly passed HERA legislation. Paulson since has admitted he took the companies over by threat. This fact has been stated in the Washington Federal Lawsuit filed against the government.
Page 30-31 Twelve Conditions
Link: https://docs.google.com/file/d/0BxUYhg0cYUOTbkZYVVJkaGtoS1E/edit?resourcekey=0-gU6I5hW3ndG5E3uY2VEyGA
Concrete Life Preserver
“Treasury Secretary at the time of the takeover, Henry Paulson, revealed in his later book On the Brink that the takeover of Fannie Mae and Freddie Mac was essentially a corporate decapitation (“the first thing they’ll hear is the sound of their heads hitting the floor”), the imagery of an assassination resonated with anyone who had been at Fannie Mae in 2008. Employees felt blindsided. Mr. Paulson’s description of the takeover as an “ambush” is spot on. The “bailout”/takeover was unrequested, unexpected, and wildly unpopular.”
The intended effect was to drown the GSEs in debt that they never needed—a “concrete life-preserver”.
“I'm a straightforward person. I like to be direct with people. But I knew that we had to ambush Fannie and Freddie. We could give them no room to maneuver.” Quoted from On the Brink.
Deferred Tax Assets fabricated losses...
FHFA and Treasury engineered these large and early losses deliberately. But without these engineered losses, Fannie Mae would never have run out of capital, and would have survived the financial crisis stronger than ever.
Fannie Mae
Form 10K For the fiscal year ended December 31, 2009
Quote: “The aggregate liquidation preference on the senior preferred stock will be $76.2 billion, which will require an annualized dividend of approximately $7.6 billion. This amount exceeds our reported annual net income for all but one of the last eight years, in most cases by a significant margin. Our senior preferred stock dividend obligation, combined with potentially substantial commitment fees payable to Treasury starting in 2011 (the amounts of which have not yet been determined) and our effective inability to pay down draws under the senior preferred stock purchase agreement, will have a significant adverse impact on our future financial position and net worth.” End of Quote Page 7
Link: https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/ir/pdf/quarterly-annual-results/2009/form10k_022610.pdf
Mr. Howard,
Quote: Once in conservatorship, the Companies’ managements had no role in negotiating the terms on which they would be offered assistance; Treasury and FHFA set these terms unilaterally. They included a requirement that any shortfalls in the Companies’ book capital be covered with “draws” of senior preferred stock that never could be repaid, meaning Fannie and Freddie had to pay a dividend to Treasury of 10 percent after-tax in cash, or 12 percent in kind, in perpetuity, on their highest amounts of senior preferred stock outstanding at any one time. This unprecedented non-repayment feature gave Treasury and FHFA an extremely strong incentive to make accounting choices for the Companies that accelerated or exaggerated their expenses and greatly increased their losses, in order to create a large and permanent flow of revenue to Treasury.
Between the time Fannie and Freddie were put into conservatorship and the end of 2011, well over $300 billion in non-cash accounting expenses were recorded on their income statements. These non-cash expenses, most of which were discretionary, eliminated all of the Companies’ capital and forced them, together, to take $187 billion from Treasury.
But because accelerated or exaggerated expenses cause losses that are only temporary, Fannie’s and Freddie’s non-cash losses began to reverse themselves in 2012. Coupled with profits resulting from a rebounding housing market, the reversal of these losses enabled both Companies to report in August 2012 sufficient second quarter income to not only pay their dividends to Treasury but also retain a total of $3.9 billion in capital.
As soon as it became apparent that a large percentage of the non-cash accounting losses booked during the previous four years was about to come back into income, Treasury and FHFA entered into the Third Amendment to the PSPA. The Third Amendment substituted for the fixed dividend payment a requirement that all future earnings—including reversals of accounting-related expenses incurred earlier—be remitted to Treasury. From the time the Third Amendment took effect through the end of 2014, Fannie and Freddie paid Treasury $170 billion, $133 billion more than they would have owed absent the Amendment.” End of Quote
Link: https://howardonmortgagefinance.com/2015/07/
HERA is public law not a contract, the Senior Preferred Stock Purchase Agreement is a contract not the law.
Page 1
PUBLIC LAW 110–289—JULY 30, 2008
HOUSING AND ECONOMIC RECOVERY ACT
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
Rhetorical question I asked the Commander. Note: paid ‘promptly’ will violate the law. To stay within Congressional Law governing the Enterprises the Jury award will have to be paid after the companies are adequately capitalized. This is my understanding.
I am not a lawyer.
Quote: “Sir, If Judge Lamberth awards prejudgment interest to be paid promptly, would this be in violation of Federal statutes? and if so, would not the commitment fee, 10% dividend and the net worth sweep all be in violation of Federal statutes?”End of Quote
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In addition recorded by
U.S. Government Printing Office (GPO)
FHEFSSA
Federal Housing Enterprises Financial Safety and Soundness Act
CHAPTER 46—GOVERNMENT SPONSORED ENTERPRISES
Restriction on Capital Distribution Page 1635
Link: https://www.fhfa.gov/Government/Documents/Federal-Housing-Enterprises-Financial-Safety-and-Soundness-Act.pdf
Guido, Tim was asked
Quote: “Tim, how much overpayments have been done with compound interest to date? Also why did FnF have to pay the 10% dividend and all of their net worth as liquidation preference even though they were and are undercapitalized (CET1), because that violates the cited FHEFSSA guidelines?”End of Quote
Tim Howard Quote: “You are correct that Fannie and Freddie’s regulatory guidelines [FHEFSSA] would have prohibited them from paying cash dividends while severely undercapitalized, but FHFA suspended those guidelines because it wanted the companies to have to draw more senior preferred stock from Treasury to pay the annual dividends in cash, to balloon their outstanding senior preferred and increase their required annual dividends by still more.” End of Quote
Keep in mind the FHFA is regulator the FHFA cannot change the law.
Link: https://howardonmortgagefinance.com/2023/06/05/response-to-fhfa-pricing-rfi/#comments
The Senior Preferred Stock Purchase Agreement is an illegal contract.
The LAW
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
Explained: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172666360
The distribution violated the Law!
The FHFA / Treasury did not apply the excess payments beyond the 10% dividend. The terms written in this Federal Regulation allows the FHFA Director to pay down the Liquidation Preference and deem the Senior Preferred Stock cancelled.
Not limited to the payment the jury awarded, most important, included is the commitment fee with the NWS...
THE LAW OF THE LAND
Code of Federal Regulation
1237.12 Capital distributions while in conservatorship.
(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.
(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:
No 1: Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;
No 2: Will contribute to the long-term financial safety and soundness of the regulated entity;
No 3: Is otherwise in the interest of the regulated entity; or
No 4: Is otherwise in the public interest.
Section c, this section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.
DID THE NET WORTH SWEEP
Enchance the ability to meet risk-based capital level? NO
Contribute to the long-term financial safety and soundness of the regulated entity? NO
In the interest of the regulated entity? NO
Is otherwise in the public interest? NO
(The taxpayers are responsible for the liabilities of the enterprises).
The Net Worth Sweep could not possibly have any rehabilitative effect and that one of the principal duties of the FHFA Director is to preserve and conserve assets.
Fannie is allowed to retain its earnings until it fully meets its applicable risk-based capital requirement (it’s currently short by $247.8 billion), but those increased retained earnings are matched by a dollar-for-dollar increase in Treasury’s liquidation preference.
https://gov.ecfr.gov/current/title-12/chapter-XII/subchapter-B/part-1237/subpart-D/section-1237.12
H.R.6094 - Federal Housing Enterprises Financial Safety and Soundness Act of 1992
102nd Congress (1991-1992)
https://www.congress.gov/bill/102nd-congress/house-bill/6094
Guido, this is my understanding.
PUBLIC LAW 110–289—JULY 30, 2008
HOUSING AND ECONOMIC RECOVERY ACT
HERA is public law not a contract, the Senior Preferred Stock Purchase Agreement is a contract not the law.
FHEFSSA
Federal Housing Enterprises Financial Safety and Soundness Act of 1992 was amended to establish the Federal Housing Finance Agency. HERA amended certain parts of both FHEFSSA and the Charter Act. AMENDED not to do away with. Safety and Soundness still exists just as the Charter Act still exists.
Page 9 Title I
Establishment of the Federal Housing Finance Agency
FHFA is now the Regulator by reason of HERA.
Links:
FEDERAL NATIONAL MORTGAGE ASSOCIATION CHARTER ACT
As amended through July 25, 2019
link: https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/aboutus/pdf/fm-amended-charter.pdf
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
SENIOR PREFERRED STOCK PURCHASE AGREEMENT
Dated September 7, 2008.
link: https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-SPSPA_09-07-2008.pdf
ALL THE AGREEMENTS
link: https://www.fhfa.gov/Conservatorship/Pages/Senior-Preferred-Stock-Purchase-Agreements.aspx
This is the argument of the Cram Down People, they reference the
The Senior Preferred Stock Purchase Agreement
Optional Pay Down of Liquidation Preference Following termination of the Commitment.
Quote: “The companies can't terminate the commitment anyway no matter what without Treasury's approval. The funding commitment doesn't have anything to do with the NWS. The funding commitment came into existence when the original SPSPAs were signed in 2008.” End of Quote.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
The LAW
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
The Senior Preferred Stock Purchase Agreement is an illegal contract.
Explained: https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172666360
Sir, If Judge Lamberth awards prejudgment interest to be paid promptly, would this be in violation of Federal statutes? and if so, would not the commitment fee, 10% dividend and the net worth sweep all be in violation of Federal statutes?
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clarencebeaks21, I read you are a lawyer, I appreciate your input.
Best Regards,
Question, is he right or wrong?
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