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I just emailed Fannie Mae Investor Relations to ask some questions:
1. What is the current outstanding debt owed to the US Treasury?
2. Do dividend payments count towards repayment?
3. What is the maximum capital reserve allowed to be retained each quarter? (assuming $3B, but I want confirmation)
I wanted to email as opposed to call, so I could share and post the reply. I'll update when I hear from them.
If you want to email, here's the link:
http://www.fanniemae.com/portal/jsp/contact-us-form.html?emailID=six
or call: 202-752-7115
Sign the petition!
Congress is using Fannie and Freddie's recent profitability as their own personal cash cow. They are sweeping all profits (over $3B) to the US Treasury as dividend payments without reducing the debt owed by Fannie and Freddie. These large projected quarterly profits will be gobbled by the Fed, without any return to the shareholder. In essence, this is a direct violation of our Fifth Amendment right (government seizure of public property without just compensation). Have a voice by signing.
Tweet it, Like it, spread the word!
http://www.freedomforfannie.com
Sign the petition!
Push this to 100 sigs and I'll start sending it out to every senator, Obama administration, and general media outlet.
Tweet it, Like it, spread the word! Have a voice!
http://www.freedomforfannie.com
Nice video, thanks for posting!
Yep, they keep calling the dividend payments taxpayer "investment return". Of course, ultimately that's good for the taxpayers because the money is flowing back into the government. However, it's not being used to pay down the debt that Fannie owes. There's a big difference between debt repayment and recouping the investment. Surely there has to be a way to satisfy both of those requirements: shave off some extra percentage for the fed's keep and use the rest to pay the bills!
What a bunch of wolves...the links below confirm my worst suspicions:
So, initially the government was supposed to receive yearly dividends of 10% on the total bailout. So, since the bailout was ~100B (for both GSEs), the fed would expect 10% of that per year, or $10B. Because Fannie/Freddie were not profitable for the first several years of conservatorship, they actually had to withdraw more money from the fed to make those dividend payments.
Fast forward to Aug 2012 (~10 months ago). A decision was made to forego the 10% dividend payment and instead do a "quarterly sweep of every dollar of profit going forward".
Interesting that just before they began posting profits these changes were enacted. I'm sure they damn well knew that Fannie was about to blow up and have been enjoying the fat paydays since, with no immediate plans for change. Even more fuel to the fire for petition signing!
Right from the source: US Treasury
Npr story stating dividends don't count as repayment
FANTASTIC seeking alpha article echoing the petition
Bailout tracker
I agree and have thought of that. I'm contacting Fannies Investor Relations dept tomorrow to do some fact-checking before I blow it up publicly...
@ Blue - I can't PM, but to answer your question, once we get significant support (~100+ sigs) I'm going to email it to the Obama administration and each senator.
It's a long shot, but better than just being angry and complacent.
Wow, I'm glad to see that my petition has garnered significant interest and support. Sincerest of thanks!
http://www.freedomforfannie.com
I don't use social media (*gasp*), but please use the links at the top of the petition page to tweet and like it. The more people we have signed up, the greater impact we'll make!
Good night ya'll! Go FNMA!
They said they may take those DTAs in the first quarter, but they have all year to do so.
I wouldn't be surprised to see them keep deferring it until they can alleviate the congressional vice they've been put in.
As I said before, I'm long on this with a substantial amount of shares. I really want to see Fannie do well, but I think understanding what's really holding it back (politics) is important.
Let's critically analyze this before jumping to conclusions.
"If and when the valuation allowance is released, it will be included as income and, as a result, we expect to report significant net income for the period in which we release the valuation allowance, with a corresponding increase in our net worth as of the end of that period. Had we released the valuation allowance as of December 31, 2012 , our 2012 net income would have increased by approximately $58.3 billion , with a corresponding increase in our net worth as of December 31, 2012. Our dividend obligation to Treasury on our senior preferred stock is the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. Accordingly, we also expect to pay Treasury a significant dividend in the quarter following a release of the valuation allowance on our deferred tax assets."
"The applicable capital reserve amount will be $3.0 billion for each quarter of 2013 and will be reduced by $600 million annually until it reaches zero in 2018" - page 2 annual report
Dividend payment = Net worth (Previous quarterly earnings) - Capital Reserve ($3B)
So unless my calculations are off, then at best Fannie can keep $3B, the rest are swept to dividends, which we know do not count toward debt elimination.
I totally agree with you Blue. They're not supposed to be profiting, but they are in a big big way. And so far, they have been legally allowed to do so.
Can't use them as a cash cow, or won't continue to? Because they certainly already have been... That's why it's imperative that the policy changes. It's only until then that this thing will take off...IMO
It would have to be Chocolate...hugs are only redeemable on people with feelings.
But seriously, this is taken verbatim from page 2 of Fannie's annual report:
"Fannie Mae has operated under the conservatorship of the Federal Housing Finance Agency (“FHFA”)
since September 6, 2008. The funding the company has received under the senior preferred stock purchase agreement with the U.S. Treasury has provided the company with the capital and liquidity needed to maintain its ability to fulfill its mission of providing liquidity and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory Reform Act of 2008. Through March 31, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion. Under the senior preferred stock purchase agreement, the payment of dividends cannot be used to offset prior Treasury draws. Accordingly, while Fannie Mae has paid $35.6 billion in dividends to Treasury, Treasury still maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock."
Clearly these rules were written when Fannie wasn't churning any profit. Since then, the feds have just been skimming the rather large profits into their piggy bank without giving Fannie any credit.
Sign the petition - Freedom For Fannie
Mods: could this be stickied for exposure?
I've made an online petition. Sign it and send it to all of your friends, family, and congressional reps. Post links on your social media sites as well. Spread the word!
http://www.freedomforfannie.com
Sign the petition - Freedom For Fannie
I've made an online petition. Sign it and send it to all of your friends, family, and congressional reps. Post links on your social media sites as well. Spread the word!
http://www.freedomforfannie.com
Fannie Mae letter of support - please read
Since I haven't really received any support from this board (thanks guys!), I've decided to post a link to the letter. I plan on emailing this to each Senator and directly to the Obama administration. I encourage each of you to do the same.
Fannie Mae letter to Congress
Give it a read...comments and critiques are appreciated.
List of Senators
List of House Representatives
Repost: I love the enthusiasm here but...
I totally agree with you Cash.
I feel like we are preaching (pumping?) to the choir. Most people on this board know how great of an investment opportunity that Fannie is. We also know that the biggest roadblocks to its success are the political uncertainties and the future of Fannie. The government is essentially skimming all profits made from Fannie as dividends and using them to feed the political machine. None of that shareholder money has been used to pay back the bailout.
Therefore, it is our job as shareholders to ensure that our congressmen/women are as informed as possible about the recent developments of Fannie.
If anyone is interested in drafting a boilerplate email that we could all use to contact our representatives, please contact me at saveourfannie[a]gmail.com. I'd be interested in spearheading the effort, as I've already got one started and mostly finished. I'd just like some additional input. Once we get a final letter put together, we can post it on this board for folks to bombard the congressional inboxes.
I love the enthusiasm here but...
I totally agree with you Cash.
I feel like we are preaching (pumping?) to the choir. Most people on this board know how great of an investment opportunity that Fannie is. We also know that the biggest roadblocks to its success are the political uncertainties and the future of Fannie.
Therefore, it is our job as shareholders to ensure that our congressmen/women are as informed as possible about the recent developments of Fannie.
If anyone is interested in drafting a boilerplate email that we could all use to contact our representatives, please PM me. I'd be interested in spearheading the effort, as I've already got one started and mostly finished. I'd just like some additional input. Once we get a final letter put together, we can post it on this board for folks to bombard the congressional inboxes.
List of US Senators
List of House Reps
More profits for Fannie...
"Mortgage financier Federal National Mortgage Association(OTC:FNMA) said on Monday that it had raised about $3 billion via the sale of reference bills in two deals. The rates offered in the bills were much lower than what had been offered in recent comparable auctions."
http://usmarketbuzz.com/fnma-financial-recap-federal-national-mortgage-association-otcfnma-american-international-group-inc-nyseaig-3382#
Feels quite similar to Friday's chart. Hoping for that end of day positive movement... Nice volume thus far though and she's still holding steady.
Somebody please tell me I'm wrong...
Looking at Fannie's 2012 annual report, it seems as if the previous payments to the Treasury in the form of dividends are not counted as repayment on their Treasury draw, please see below:
"Fannie Mae has operated under the conservatorship of the Federal Housing Finance Agency (“FHFA”) since September 6, 2008. The funding the company has received under the senior preferred stock purchase agreement with the U.S. Treasury has provided the company with the capital and liquidity needed to maintain its ability to fulfill its mission of providing liquidity and support to the nation’s housing finance markets and to avoid a trigger of mandatory receivership under the Federal Housing Finance Regulatory Reform Act of 2008. Through March 31, 2013, Fannie Mae has requested cumulative draws totaling $116.1 billion. Under the senior preferred stock purchase agreement, the payment of dividends cannot be used to offset prior Treasury draws. Accordingly, while Fannie Mae has paid $35.6 billion in dividends to Treasury, Treasury still maintains a liquidation preference of $117.1 billion on the company’s senior preferred stock. "
http://www.fanniemae.com/resources/file/ir/pdf/quarterly-annual-results/2012/q42012_release.pdf_page2
So, my question is, are all profits (aside from the yearly $3B in capital) swept to the Treasury as dividend payments? This seems duly unjust, as how in the hell would Fannie ever pay back their debt to the Treasury? It's almost as if the rules of repayment were made in expectation of failure... I understand that the government needs to make some money off of the bailout, but this is ridiculous.
Another question, what happens to the money captured from DTA and big bank lawsuits? Would these also be swept to the Treasury in the form of dividends? Somebody please tell me I'm misinterpreting the facts.
This could very well explain why Fannie decided to defer the DTA. Perhaps they are hoping for a structured deal with Congress for their release from conservatorship or at least a solvent repayment plan. Makes a lot more sense to have those LARGE paydays count towards repayment as opposed to governmental cash-cow dividends.
I'm a long on FNMA with a decent amount of shares. I'm rooting for big success as we all are, just trying to understand the reality of the situation better...
I like this excerpt from the Congressional Report on GSE's (as per King of Kings post). It demonstrates that Congress has considered the option of returning Fannie/Freddie to shareholder control if in fact they become profitable...
~~
Option: Return Control to Stockholders
Congress could decide to make little or no change to the GSEs’ charters. The GSEs would continue to be stockholder-owned companies with special charters and special obligations to support the housing market.
If this option were adopted, common stockholders would regain their right to elect the boards of directors, which in turn would appoint senior management. Dividends to preferred stockholders could resume. Dividends on the senior preferred stock owned by the federal government would continue. The GSEs would decide whether to retire the senior preferred stock held by the federal government. The boards of directors could resume common dividends. Bond payments would continue. As required by the contract with Treasury, the GSEs would shrink their portfolios by 15% annually until their portfolios were less than $250 billion.
Return to stockholder control implicitly assumes that the GSEs would return to profitability. Since all quarterly profits are paid to Treasury as dividends, the GSEs cannot accumulate funds necessary to leave conservatorship. In agreeing to conservatorship, the GSEs each gave the federal government warrants to purchase 79.9% of their common stock for $0.00001 per share. GSEs and the Government’s Role in Housing Finance: Issues for the 113th Congress Congressional Research Service 9.
Before effective control could be returned to common stockholders, the GSEs probably would need to reach some agreement with the federal government over the disposition of these warrants and the senior preferred stock. Based on similar past government intervention such as Chrysler in 1979, Continental Illinois in 1985, and more recently the troubled asset relief program (TARP), alternative dispositions of these warrants include federal government exercise, sale of the warrants through a federal government open market auction (which the GSEs could win), and federal government cancellation of the warrants.23 In early 2013, with its stock trading at approximately $0.25, Fannie Mae had a market capitalization of approximately $340 million. This would make 80% of the enterprise worth $270 million. In early 2013, Freddie Mac’s stock price was $0.30 and its market capitalization was slightly less than $185 million, making 80% of Freddie Mac worth $148 million. Because the GSEs “have succession until dissolved by Act of Congress,” it is not clear what limits there might be on an outside company purchasing the warrants.
http://www.fas.org/sgp/crs/misc/R40800.pdf
Another long day tomorrow? FNMA down 4.39% after hours to 0.762.
http://www.nasdaq.com/symbol/fnma/after-hours#.UVn9stF34mZ