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Grand Theft Treasury
By: Richard A. Epstein
Quote: "To call that money a “dividend” relies on a profound public misunderstanding of the complex transactions that generated this ill-begotten Treasury bonanza." End of Quote.
Quote: "It takes no special acumen to realize that the 2012 transaction was completely one-sided; FHFA and Treasury used a fancy set of legal maneuvers to strip both corporations of their assets for the sole benefit of the government. Generally, senior preferred shareholders are entitled to recover their principal and interest in full, after which their shares are cancelled. In this case, the government did precisely the opposite. It treated Fannie and Freddie as gifts that keep on giving, wiping out all shareholder profits." End of Quote
Link: https://www.hoover.org/research/grand-theft-treasury#:~:text=Grand%20Theft%20Treasury%20The%20U.S.%20government%20has%20unconstitutionally,full%20of%20good%20news%20for%20the%20body%20politic.
The Market Cap of the Common Stock would reflect the value of the companies earnings power in price per share if the Treasury would get out of the way. The share price as of today’s trading has absolutely nothing to do with the VALUE of Fannie and Freddie. The question, how big of a slice will the Treasury get away with?
Without the Warrants
Earnings Power of the Business
A multiple of 14 is not unreasonable
Fannie Mae
07/29/2022
Reports $4.7 Billion for Second Quarter 2022
EARNINGS POWER OF THE BUSINESS
Market Cap $263 Billion
Fannie Mae’s common stock outstanding 1,158,087,567
$4.7 billion net income for the second quarter of 2022.
Fannie Mae’s net earnings $4.7 billion per quarter, a projection of $18.8 billion net per year.
$18.8 billion net / 1,158,087,567 = $16.23 per share of earnings
PE Ratio of 14 x $16.23 = $227.22 per share Intrinsic Value
Even if we calculate a lower multiple the Earnings Power of Fannie Maes business is incredible. The below example of a secondary offering to raise the capital required by the FHFA and remove the Treasury out of our business is not hard to do.
If the FHFA would adopt the suggestion from Mr Howard, at 2.5 percent capitalization requirement this would open up, and facilitate, a path for the companies out of conservatorship.
If the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value, this could happen only if the Treasury would assure the market that the company has been returned to shareholders as a for profit publicly traded company. The company could still function for the purpose of its charter.
Example of a Secondary Offering IPO calculated for Fannie Mae.
From 2nd Quarter 10Q 2022,
Quote: “Fannie Mae is a leading source of financing for mortgages in the United States, with $4.3 trillion in assets as of June 30, 2022.” End of Quote.
$4.3 trillion x 2.5 percent = $107.5 billion of total assets minus $56.4 billion company's net worth = $51.1 billion amount in a secondary offering to adequate capitalization.
Secondary Offering IPO would add Equity (cash) to the balance sheet, the secondary offering contributes the necessary capital to satisfy the FHFA requirement under the set capital rule. Keep in mind, new investors are buying earnings power of the business, the Shareholders are not giving away the company in a secondary IPO without a price; Investors are doing just that buying into the company.
Fair Market Value of the Earnings Power of the business $45.64 per share. (this calculation includes the 79.9% warrants converted to common stock). How much of a discount of the fair value the company would have to give up to attract new investors to participate in such a secondary offering I am not sure. The below example I will use a 15 percent discount.
Fannie Mae
07/29/2022
Reports $4.7 Billion for Second Quarter 2022
EARNINGS POWER OF THE BUSINESS
Market Cap $263 Billion
Fannie Mae’s common stock outstanding 1,158,087,567
$4.7 billion net income for the second quarter of 2022.
Fannie Mae’s net earnings $4.7 billion per quarter, a projection of $18.8 billion net per year.
With the WARRANTS: Fannie Mae’s common stock outstanding 1,158,087,567 diluted by the warrants at 79.9 percent adds a total of 5,761,629,686 shares outstanding…
$18.8 billion net / 5,761,629,686 = $3.26 per share of earnings,
PE Ratio of 14 x $3.26 = $45.64 per share intrinsic value,
Market Cap 263 billion / 5,761,629,686 billion shares = $45.64 per share intrinsic value.
Example: If the company is required an additional $51.1 billion as a capital requirement to reach the $107.5 billion of the 2.5 percent of total assets, and to make the secondary offering attractive the price per share could be at extreme discount of 15 percent and in this case the secondary offering would price at $38.79 per share;
$45.64 Per Share Intrinsic Value minus 15 percent = $38.79
$51.1 billion secondary IPO / $38.79 = 1,317,349,832 billion new shares.
After the secondary offering a total of 7,078,979,518 billion common shares outstanding.
Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 per share intrinsic value.
FROM A PRIVATE INVESTOR POINT OF VIEW:
Example with Warrants:
Estimated Net income per year $18.8 billion / 7,078,979,518 billion shares total after secondary offering = $2.65 per share net income per year; amount of net profits Fannie generates per year per share.
Secondary Offering priced at $38.79 per share minus $37.15 per share Intrinsic Value after secondary offering = $1.64; the new equity owners are buying $1.01 per share net earnings per year for $1.64 per share; $2.65 minus $1.64 = $1.01 per share.
Again, new investors are buying earnings power of the business, shareholders are not giving away the company in a secondary IPO without a price, Investors are doing just that buying into the company.
Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 Per Share Intrinsic Value.
Treasury holds 4,603,542,119 billion shares x $37.15 = $171 billion.
Common Shareholders 2,475,437,399 billion shares x $37.15 = $92 billion.
Individual shareholders multiply number of shares x $37.15 = intrinsic value of your holding.
In my calculation no amount of dividends were added for the JPS. The JPS are on the books at a small amount of company equity in the amount of 19.1 billion. The JPS are not due any amount of accumulated backward dividends, every issue of JPS are Non Cumulative.
The advantage of the JPS is in a receivership; And receivership is not in discussion any longer.
Conclusion, the GSEs business model, simply there’s no better. So, Fannie Mae can issue, at a later date in time (no rush), Non Cumulative Preferred Stock replacing the higher dividend payment to the existing JPS at a lower payout rate. The JPS Shareholders receive Par Value with a New offering.
Intrinsic Value of the Earnings Power of Fannie Mae.
If the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value, this could happen only if the Treasury would assure the market that the company has been returned to shareholders as a for profit publicly traded company.
Fannie Mae
07/29/2022
Reports $4.7 Billion for Second Quarter 2022
EARNINGS POWER OF THE BUSINESS
Market Cap $263 Billion
Fannie Mae’s common stock outstanding 1,158,087,567
$4.7 billion net income for the second quarter of 2022.
Fannie Mae’s net earnings $4.7 billion per quarter, a projection of $18.8 billion net per year.
With the WARRANTS: Fannie Mae’s common stock outstanding 1,158,087,567 diluted by the warrants at 79.9 percent adds a total of 5,761,629,686 shares outstanding…
$18.8 billion net / 5,761,629,686 = $3.26 per share of earnings,
PE Ratio of 14 x $3.26 = $45.64 per share intrinsic value,
Market Cap 263 billion / 5,761,629,686 billion shares = $45.64 per share intrinsic value.
Stop with the SPS Conversion.
Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACT: The Senior Preferred Stock cannot be converted to common stock.
No 6 and No 7
Quote “No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.
No Preemptive Rights
No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
Comments Section
Quote: "Thank you, Washington Post, for finally presenting the shareholders side of this huge mess. As will be proven in the courts, this massive fraud never needed to happen in the first place. Fannie and Freddie had more than enough capital to survive the 2008 financial crisis. And while hindsight is 20-20 vision, the fact is that the GSEs were in no danger, none whatsoever, when Paulson threatened the boards and coerced them into giving the government control. Paulson could have waited to see whether government assistance was needed. But he wasn't about to let a good crisis go to waste.
Why would Paulson do this? Because for two decades FM Watch, funded by Wall Street banks and investment firms, had lobbied for the ending of the GSEs. Without Fannie and Freddie, Wall Street would securitize all the mortgages, and make all the money, and mortgages would become much more expensive. The GSEs were so efficient Wall Street couldn't compete. Without the GSEs, Wall Street would reap untold billions in profits in the mortgage securitization business.
There never was a liquidity crisis at Fannie and Freddie, like at Bear Stearns, Lehman Brothers, Merrill Lynch, Morgan Stanley, AIG, GM, etc. They were never undercapitalized until Paulson changed the rules in 2008 and declared them undercapitalized. There was never an infusion of cash; the books were changed to reflect additional capital received from the government. But there was no need for the additional capital. If Fannie and Freddie had received a line of credit from the government, instead of a paper infusion of capital, they would never have had to borrow a penny.
In fact, the GSEs did have a line of credit from the government, on much better terms. But Paulson refused to let them access that line of credit.
Paulson wanted the GSEs gone, for good. But he couldn't do it directly, so he tried to do it indirectly through a fake conservatorship. It's a bet he lost, but he certainly took the shareholders down with him." End of Quote...
Quote: "Weeks before the companies were placed into conservatorship, on July 8, 2008, James Lockhart, director of the Office of Federal Housing Enterprise, had this to say on CNBC "Both of these companies are adequately capitalized, which is our highest criteria..." Other Treasury officials and an independent analysis of F&F's financial stability confirmed the same. During the same interview, Lockhart stated "An accounting change should not drive a capital change."
Fannie Mae had $47 billion in regulatory capital and was in full compliance with all of its statutory capital requirements on the day it was put into conservatorship and the senior preferred stock agreement was signed. But that was irrelevant. Treasury had long believed the company’s capital was inadequate, and they finally had the power to make their view the only one that counted.
During the following 18 months, Fannie Mae’s actual credit-related losses—its loan charge-offs and foreclosed property expense—were just $16 billion. Virtually all the rest of its losses were accounting changes made by the company’s conservator, FHFA, that pulled into Fannie Mae’s 2008 and 2009 financial statements over $100 billion in "expenses" that, as it turns out, never occurred.
FHFA took a $21 billion charge to set up a reserve against the company’s deferred tax assets, arguing that it would not earn enough in the future to realize their full value, and gave a similar reason for writing off $8 billion in low-income housing tax credits. FHFA also took $17 billion in impairments on the company’s private-label security holdings and put $56 billion into its reserve for future loan losses, increasing that to $66 billion on December 31, 2009.
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." End of Quote.
Link: https://www.washingtonpost.com/business/did-the-us-shortchange-investors-27-billion/2022/09/21/12aaec36-396b-11ed-b8af-0a04e5dc3db6_story.html
At the start of the conservatorship, there were many (not all) JPS Holders calling for receivership, throwing the Common Shareholders under the bus! Well, it backfired, the Net Worth Sweep took place, (wipeout both common and preferred) The ‘Mistake’ instead of filling lawsuit against the entire conservatorship from the beginning the Collins lawsuit challenged the 3rd amendment NWS only. If we return to the Collins case which came in front of the SCOTUS it was asked by one of the Justices, why didn’t the Plaintiffs challenge the conservatorship as a whole instead of the Net Worth Sweep only. It’s called greed my friend.
Barron4664 said, Quote: " In fact, none of our court cases will work because they are focused on the language within the contract” End of Quote
I disagree, the Plaintiffs can win with the contract written just the way it is...
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACTS: Optional Pay Down of Liquidation Preference 3 (b)
Quote: “In the event the Company shall pay down of the Liquidation Preference of the Senior Preferred Stock as aforesaid, notice of such pay down shall be given by the Company by first class mail, postage prepaid, mailed neither less than 10 nor more than 45 days preceding the date fixed for the payment, to each holder of record of the shares of the Senior Preferred Stock, at such holder’s address as the same appears in the books and records of the Company. Each such notice shall state the amount by which the Liquidation Preference of each share shall be reduced and the pay down date.” End of Quote
No one from the company has sent a letter to the Treasury stating the Liquidation Preference has been paid in full and the Senior Preferred Stock canceled. Instructions are written in the contract to do so. Reason, Treasury appointed CEOs work for the Treasury and not the companies.
WRITTEN IN THE CONTRACT STATES THE MONEY SENT TO THE TREASURY PAYS DOWN THE LIQUIDATION PREFERENCE AND WITH THIS PAY DOWN THE SPS REDEEMED
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
More than enough money has been collected by the Treasury to deem the SPS redeemed. The commitment could be replaced easily with funding from Wall Street. The below was dated back in 2021. Since more money has been paid to the Treasury.
SCOTUS Quote:
“MR. THOMPSON: Number 1, we're seeking prospective relief so that in your hypothetical the Senate confirmed director would be enjoined from making any future sweep dividend, approving any future sweep dividend payment; and, number 2, we're asking to go back and have the overpayments, over and above the $18.9 billion, to be treated as a pay down of principal. And that would essentially deem the government paid back.
We calculate
those overpayments to be 124 billion dollars,
and each one of those overpayments was an
implementation of the Net Worth Sweep.
So, if there had not been a Net Worth
Sweep, there would be 124 billion dollars of
capital on the balance sheet today.
And if you do the math, the government's been paid back in toto plus 10 percent interest and there's 29.5 billion dollars left over.” End of Quote
https://www.supremecourt.gov/oral_arguments/argument_transcripts/2020/19-422_3e04.pdf
Barron4664 said, Quote: " In fact, none of our court cases will work because they are focused on the language within the contract and conflate that with the powers granted FHFA through HERA." End of Quote.
The FHFA had no right to take over the companies under the Law of HERA.
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
More than enough money has been collected by the Treasury to deem the SPS redeemed. The commitment could be replaced easily with funding from Wall Street. The below was dated back in 2021. Since more money has been paid to the Treasury.
SCOTUS Quote:
“MR. THOMPSON: Number 1, we're seeking prospective relief so that in your hypothetical the Senate confirmed director would be enjoined from making any future sweep dividend, approving any future sweep dividend payment; and, number 2, we're asking to go back and have the overpayments, over and above the $18.9 billion, to be treated as a pay down of principal. And that would essentially deem the government paid back.
We calculate
those overpayments to be 124 billion dollars,
and each one of those overpayments was an
implementation of the Net Worth Sweep.
So, if there had not been a Net Worth
Sweep, there would be 124 billion dollars of
capital on the balance sheet today.
And if you do the math, the government's been paid back in toto plus 10 percent interest and there's 29.5 billion dollars left over.” End of Quote
https://www.supremecourt.gov/oral_arguments/argument_transcripts/2020/19-422_3e04.pdf
The funding commitment cannot be terminated when all the NET WORTH IS TAKEN AWAY FROM THE COMPANIES, NO MONEY TO REDEEM THE SPS!
You can continue this endless maze of confusion by playing on words.
FACTS! OVER $301 BILLION HAS BEEN SENT TO THE TREASURY.
Ha, the liquidation has not been paid in full. That is right. When all the Net Worth is swept into the dark hole of the Treasury no money left over to pay down the LP.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School. AND YOU STATE THE PROFESSOR IS WRONG. you are the one wrong.
Charles Potato said it best,
“You really have to admire these lawmakers, they come up with some great terminology. Net Worth Sweep, think about that for a minute. Sweeping all of your net worth.”
"It was the darnedest thing. I paid off my car and went to pick up the title at the bank. They told me the car belonged to them even though I made all the payments. They said my payments were swept into the dealers bank account and none of the money went to paying off the car. They said if I want to keep driving the car I need to keep making the payments. I asked them when I would have the car paid off and they said never, I have to just keep paying. They told me I must maintain the car and keep it in good working order, and they might come over to my house and set it on fire one day, but they are not sure when." End of Quote
Oh, my goodness! Shall, playing on words!
Read it, under the heading
Optional Pay Down of Liquidation Preference 3 (b)
You ask me to show the sentence?
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACTS: Optional Pay Down of Liquidation Preference 3 (b)
Quote: “In the event the Company shall pay down of the Liquidation Preference of the Senior Preferred Stock as aforesaid, notice of such pay down shall be given by the Company by first class mail, postage prepaid, mailed neither less than 10 nor more than 45 days preceding the date fixed for the payment, to each holder of record of the shares of the Senior Preferred Stock, at such holder’s address as the same appears in the books and records of the Company. Each such notice shall state the amount by which the Liquidation Preference of each share shall be reduced and the pay down date.” End of Quote
No one from the company has sent a letter to the Treasury stating the Liquidation Preference has been paid in full and the Senior Preferred Stock canceled. Instructions are written in the contract to do so. Reason, Treasury appointed CEOs work for the Treasury and not the companies.
WRITTEN IN THE CONTRACT STATES THE MONEY SENT TO THE TREASURY PAYS DOWN THE LIQUIDATION PREFERENCE AND WITH THIS PAY DOWN THE SPS REDEEMED
Link: https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
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/
Optional Pay Down of Liquidation Preference
Optional Pay Down of Liquidation Preference
Optional Pay Down of Liquidation Preference
Get it? What do you mean “ never have had the ability to pay down the seniors any time they wanted to.”
The Net Worth Sweep took all the money! The SPS would be redeemed today if it had not been for the NWS.
Professor Epstein is not wrong you are wrong.
Professor Epstein stated the SPS would have been redeemed.
The Senior Preferred Stock held by the Treasury was not a perpetual equity investment in Fannie and Freddie at the moment in time when the companies were put in conservatorship. The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, this wording remains unchanged today.
Optional Pay Down of Liquidation Preference Following termination of the Commitment.
The companies cannot terminate the commitment WHEN ALL THE NET WORTH IS SWEEP INTO THE TREASURY.
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. When this took place all the money above the 10 percent dividend was not retained by the companies no money left to accumulate to terminate the commitment, to pay off the liquidation preference and cancel the SPS.
Quote “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
The above statement was made by Professor Epstein on April 5, 2016. Since that time the Fannie and Freddie has sent to the Treasury $301 billion.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.
Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACT: The Senior Preferred Stock cannot be converted to common stock.
No 6 and No 7
Quote “No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.
No Preemptive Rights
No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
Get the Market-Makers to Naked Short Fannie Mae stock into oblivion, creating the sense the company is bankrupt, Too Big to Fail, (TBTF), and will destroy the U.S. Economy if something is not done. After, forcing the company into a takeover, (nationalization), make Fannie Mae write off all of the future Deferred Tax Asset creating a huge onetime loss-making sure Fannie Mae will never ever return to profitability ever. After the take down divide the company up with all the banker friends.
The Treasury Secretary holds a meeting with a group of Wall Street Managers, many former Goldman Sachs employees with the intent to reveal his plan to take over Fannie Mae and Freddie Mac wiping out the common stock and preferred shares.
Quote: “Bloomberg Markets reports that in July 2008 then-Treasury Secretary Hank Paulson told a meeting of big investors, including several fellow Goldman Sachs alumni, how he would nationalize Fannie and Freddie and wipe out shareholders, leaving little doubt that the Treasury Department would carry out the plan, according to Bloomberg's source.” End of Quote.
RESERVES FANNIE MAE NEVER NEEDED
James Lockhart
Congressman Alan Grayson Discusses Fannie Mae's use of Derivatives with James Lockhart of the FHFA. Hearing on June 3, 2009.
Time 5:00: Mr. Alan Grayson, Quote: “If those losses are only 192 million dollars how could 192-million-dollar loss result in a 100 billion dollar plus loss to the Taxpayer how is that possible?” End of Quote.
Mr. Lockhart of the FHFA answers, “Had to put up reserves, ooh ooh aha aha ooh aha, reserves, ooh ooh aha ooh, put up reserves for loans, aha aha aha ooh, if you think you cannot recover and loans aha aha ooh and that's what happened.” Reserves... (not an exact word for word quote of Mr. Lockhart).
Note: “If you think you cannot recover.” (Mr. Lockhart).
Time 5:55: Follow up question; Mr. Alan Grayson, Quote: “I still don't have a clear understanding from you about how a relative tiny amount like a 192 million dollar of unpaid mortgage interest on what is a trillion-dollar portfolio how that could possibly lead to Taxpayer shell out a 100 billion dollars plus.” End of Quote.
Mr. Lockhart attempts to explain the need to build up reserves... reserves... reserves...
Reserves Fannie Mae never needed.
Link:
The Jury needs to hear this fact.
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
Someone said HERA is the Law, yes that is true. FHFA / Treasury did not follow the Law.
Link: https://gselinks.com/Court_Filings/Washington_Federal/13-385-0001.pdf
The money was swept into the dark hole of the Treasury.
Not sure of the exact amount but it was a lot. What stands out the GSE's did not cause the 2008 market crash.
bobstruths did the research several years back, posting what he found:
Quote: "bobstruths
Here is bank settlements I put together from info obtained from Reuters. It is only current thru 2016:
Enjoy!
When you read that the housing bubble was caused by FnF lowering their lending standards, keep in mind that settlements by those who misrepresented the quality of their mortgages were the ones who paid settlements for overstating the quality of the mortgages they sent to FnF. That list is long:
Lawsuits filed against those who misrepresented the quality of the mortgages sold to FnF totaled about $192 billion and settlements on those suits was about $42 billion. The checks were sent to FnF then the money was swept to Treasury with the quarterly Net Worth Sweep. In most cases, FHFA accepted settlements at about 15-20 cents on the dollar of the base amounts listed in the suit. Plus, some of the listed had multiple suits.
1. Ally Financial $52 million settlement on a $6 billion suit
2. Bank of America $16.65 billion settlement on a $57.45 billion suit
3. Barclays Bank PLC $280 million settlement on a $4.9 billion suit
4. Citigroup, Inc $7 billion settlement on a $? billion suit
5. Countrywide Financial see Bank of America
6. Credit Suisse $885 million settlement on a $14.1 billion suit
7. Deutsche Bank $1.92 billion settlement on a $14.2 billion suit
8. First Horizon National $110 million settlement on a $883 million suit
9. General Electric $550 million check payable to FnF settlement on a $550 million suit
10. Goldman Sachs $3.15 billion settlement on a $11.1 billion suit
11. HSBC North America Holdings, Inc. $550 million settlement on a $6.2 billion suit
12. JPMorgan Chase & Co. $4 billion settlement on $33 billion suit
13. Merrill Lynch see B of America
14. Morgan Stanley ? Suit was for $11.58 billion
15. Nomura Holding $839 million settlement on a $2 billion suit
16. The Royal Bank of Scotland $5.5 billion settlement on a $30.4 billion suit
17. Société Générale $122 million settlement on a $1.3 billion suit
That is a lot of money and FnF did not get to keep it.
In suing, "the FHFA was not looking for repurchases, but rather was looking to retrieve losses on Fannie and Freddie’s loan portfolios". These losses were not born by the US Government, but were losses experienced by FnF and FnF shareholders! Nonetheless, Treasury and the Obama Administration took all the settlements." End of Quote
Yes, HERA was law, Paulson did not follow the law.
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
Again, a reminder of a possibility of a problem before Fannie and Freddie can come out of conservatorship.
I did not receive any correspondence of information from the Class Action Plaintiffs concerning my stock holdings in both Fannie Mae and Freddie Mac. How many other holders did not receive any type of communication? How do we know our shares are in the count? And who is responsible if shareholders hold counterfeit shares? Maybe, this is one reason the conservatorship is 15 years into the making. In the court case before Judge Lamberth if the junior preferred holders of Fannie and Freddie, and the common holders of Freddie receive a settlement the holders of the shares will have to be in the count. What happens when the shareholders find out their shares possibly do not exist?
The counterfeiting of shares of Fannie and Freddie. The primary market makers in these two GSEs are Goldman Sachs (Fannie Mae) and LaBranche & Co. (Freddie Mac). Page 19 recorded in link below.
The U.S. Securities and Exchange Commission knew about this, it's reported on their website.
Several years ago I attempted to obtain the list of common and preferred stock holders of record by contacting the transfer agent at Computershare Trust. Fannie Mae governed by the Security and Exchange Commission is required to report this information to the shareholders. I was given the run around and did not press the issue.
Computershare Trust Company, N.A., address P.O. Box 505005 Louisville, KY 40233-5005.
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.
In the court case before Judge Lamberth if the junior preferred holders of Fannie and Freddie, and the common holders of Freddie receive a settlement the holders of the shares will have to be in the count. What happens when the shareholders find out their shares do not exist?
The counterfeiting of shares of Fannie and Freddie. The Market Makers should be held responsible. The U.S. Securities and Exchange Commission knew about this, it's reported on their website.
Several years ago, I attempted to obtain the list of common and preferred stockholders of record by contacting the transfer agent at Computershare Trust. Fannie Mae governed by the Security and Exchange Commission is required to report this information to the shareholders. I was given the run around and did not press the issue.
Computershare Trust Company, N.A., address P.O. Box 505005 Louisville, KY 40233-5005.
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?
Link: https://www.sec.gov/comments/s7-08-09/s70809-407a.pdf
The new director is laughing about it. I don’t think any of this is laughable. It’s a crime. Acting Director Sandra L. Thompson 14 years in conservatorship
Time: 28 minutes
Laughing, the companies were in the 3rd grade now there in high school....
Nothing funny about stealing, reminds me of a scripture in the Word of God:
“It is better to hear the rebuke of the wise, than for a man to hear the song of fools. For as the crackling of thorns under a pot, so is the laughter of the fool: this also is vanity.” Ecclesiastes 7:5-6
Link:
Evidence the Jurors should know.
Deferred Tax Assets fabricated losses, the FHFA admits this fact in a foot note on their own website.
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. Fabricated losses to make the companies appear bankrupted.
FROM NUMBER 1 FOOT NOTE FHFA WEBSITE: link below
Quote: “Both GAAP stockholders’ equity and GAAP net worth are measures of the difference between an Enterprise’s assets and liabilities. Both measures include realized and unrealized losses as of the reporting date. Losses ultimately realized in the future may differ from unrealized losses as of the reporting date.” End of Quote... NOTE: “UNREALIZED LOSSES”
Mr. Howard Quote: “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.” End of Quote
Link: https://www.fhfa.gov/DataTools/Downloads/Documents/HPI/Market-Data/Table_1.pdf
The coming jury trial the evidence the plaintiffs give I suggest should start from the beginning. It has been said the statue of limitations to prosecute the crime has passed, but the truth has not changed. The Jurors should have the knowledge of this truth for the express reason if a ruling is in favor of the plaintiffs in a settlement the calculation of such a settlement should start with the Intrinsic Value of the Company before the Market Makers crashed the stock price not after the fact. The settlement should be a calculated value of the company based on value not quoted stock price.
A quoted share price does not always reflect the value of a company. We know this to be a fact at today's price of 0.64¢ per share we absolutely know the company is worth more. Today's share price has nothing to do with the value of the company.
The Market-Makers Naked Short of Fannie Mae's stock into oblivion, created the sense the company was bankrupt too big to fail and would destroy the U.S. Economy if something was not done. Afterwards, forced the company into a takeover (nationalization) making the company write off all of the deferred tax assets creating a huge loss to further the appearance the company to be bankrupt in an attempt to never ever allow Fannie Mae to return to profitability ever. Link Below
EVIDENCE
Mr. Howard Quote, “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.” End of Quote
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
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?
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
Using a conservative calculated figure of a Market Cap for Fannie Mae's common stock at $230 billion the money due the JPS at par is small in comparison. The JPS are listed on the books at $19.1 billion, this calculates at 8.3 percent of the value of the common stock. The JPS are not due any amount of accumulated backward dividends, every issue of JPS are Non Cumulative. Many, not all, JPS holders think the whole company revolves around them only; and for some unexplained reason the same few want to see the common shareholders wiped out.
At this space in time only three equity owners have right to the intrinsic value of Fannie Mae which are Treasury, JPS Holders and Common Shareholders. Treasury has received $301 billion from both Fannie and Freddie. The Fannie Mae JPS are due $19.1 billion, and the Common Shares Holders own the company.
Can this be settled where all three owners are satisfied?
Mr Howard, Quote: “First, Treasury and FHFA must agree to cancel the net worth sweep, and eliminate Treasury’s liquidation preference. Fannie and Freddie already have repaid their senior preferred stock, with 10 percent interest. And Treasury should not require that the companies’ senior preferred be converted to common. To do so would be to require them to repay their indebtedness to Treasury twice, which is unjustifiable, and blatantly unfair. Without the senior preferred, Fannie and Freddie’s combined March 31, 2022 capital shortfall of $441 billion would be cut to $248 billion, or by 44 percent.' End of Quote. From “A Capital Reality Check” May 23, 2022
The FHFA and Treasury will have to rip up the Terms of the Agreement to convert the Senior Preferred to Common.
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACT: The Senior Preferred Stock cannot be converted to common stock.
No 6 and No 7
Quote “No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.
No Preemptive Rights
No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
The Senior Preferred Stock held by the Treasury was not a perpetual equity investment in Fannie and Freddie at the moment in time when the companies were put in conservatorship. The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, This wording remains unchanged today.
Optional Pay Down of Liquidation Preference Following termination of the Commitment.
The companies cannot terminate the commitment WHEN ALL THE NET WORTH IS SWEEP INTO THE TREASURY.
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. When this took place all the money above the 10 percent dividend was not retained by the companies no money left to accumulate to terminate the commitment, to pay off the liquidation preference and cancel the SPS.
Quote “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 The above statement was made by Professor Epstein in April 5, 2016. Since that time the Fannie and Freddie has sent to the Treasury $301 billion.
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School.
Charles Potato said it best,
“You really have to admire these lawmakers, they come up with some great terminology. Net Worth Sweep, think about that for a minute. Sweeping all of your net worth.”
"It was the darnedest thing. I paid off my car and went to pick up the title at the bank. They told me the car belonged to them even though I made all the payments. They said my payments were swept into the dealers bank account and none of the money went to paying off the car. They said if I want to keep driving the car I need to keep making the payments. I asked them when I would have the car paid off and they said never, I have to just keep paying. They told me I must maintain the car and keep it in good working order, and they might come over to my house and set it on fire one day, but they are not sure when." End of Quote
Quote "My neighbor needed a loan, and we drew up a loan agreement. After he signed the loan agreement I made a change to it stating that my neighbor must give me all the money he makes for as long as I want to take it. We entered into the agreement years ago and I have made a fortune from him, so I think I'll keep the agreement just the way it is. I do give the guy enough money so he can eat and pay his electric bill, so he should be very happy. When I get tired of this deal I think I'll burn his house down because somebody might fall and get hurt in there." End of Quote
Link: https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
JPS are due $19.1 billion for Fannie only. I should have written that clearly. Best Regards
At the start of the conservatorship, there were many (not all) JPS holders calling for receivership, throwing the common shareholders under the bus! Well, it backfired, the Net Worth Sweep took place and the Treasury was determined to wipe out both common and JPS. AND still today many JPS holders want the common shareholders wiped out by making the common holders pay the Treasury twice.
Fannie and Freddie already have repaid their senior preferred stock, with 10 percent interest. I ask again, Is it ethical, morally good or correct, to make the companies’ repay their indebtedness to Treasury twice? What's amazing many JPS holders think the whole company revolves around them only. And the old tired argument, 'we have to protect the taxpayer'... that is laughable.
Fannie Mae is a 'Cash Generator' The Intrinsic Value of the Earnings Power of the Business is worth $263 billion using a price to earnings ratio of 14 in the amount of net earning per year $18.8 billion, if we calculated the earnings power with a lower multiple and the net earning per year lower, the company is still worth far more than the holdings of the JPS. The JPS are on the books at a small amount of company equity in the amount of $19.1 billion. If the Market Cap calculates at $263 billion or at $230 billion either way the company is worth a lot of money and the money due the JPS is small in comparison.
The three equity owners that have rights to the Intrinsic Value of Fannie Mae are Treasury, JPS Holders and Common Shareholders. I have said all along the fight will be how much equity each owner will receive.
The Treasury has received $301 billion from the companies, the JPS are due $19.1 billion, and the common shares own the companies. Will this be settled where all three owners are satisfied?? It can be if the Sin of Greed is put out of the way!
Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACT: The Senior Preferred Stock cannot be converted to common stock.
No 6 and No 7
Quote “No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.
No Preemptive Rights
No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote
https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf
First, Treasury and FHFA must agree to cancel the net worth sweep and eliminate Treasury’s liquidation preference. Fannie and Freddie already have repaid their senior preferred stock, with 10 percent interest. Is it ethical, morally good or correct, to make the companies’ repay their indebtedness to Treasury twice?
Professor Richard Epstein
Quote: "In closing, there is a simple test by which to measure the probity of the combined actions of FHFA and Treasury. If FHFA were replaced by a private trustee, and Treasury were replaced by a private supplier of fresh debt or equity capital, both parties would end up in jail if they concocted a scheme that resembled the NWS. Everyone would cut through the various smokescreens to see that the excess dividends were a naked raid on the interests of the other shareholders as happened here.” End of Quote
Richard A. Epstein is the Laurence A. Tisch professor of Law at NYU, senior fellow at the Hoover Institution, and senior lecturer at the University of Chicago Law School."
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/
If the FHFA would adopt the suggestion from Mr Howard, at 2.5 percent capitalization requirement this would open up, and facilitate, a path for the companies out of conservatorship.
If the Treasury would deem the liquidation preference paid and the Senior Preferred Stock canceled the company's common stock could be relisted on the NYSE and trade at fair value, this could happen only if the Treasury would assure the market that the company has been returned to shareholders as a for profit publicly traded company. The company could still function for the purpose of its charter.
Example of a Secondary Offering IPO calculated for Fannie Mae.
From 2nd Quarter 10Q 2022,
Quote: “Fannie Mae is a leading source of financing for mortgages in the United States, with $4.3 trillion in assets as of June 30, 2022.” End of Quote.
$4.3 trillion x 2.5 percent = $107.5 billion of total assets minus $56.4 billion company's net worth = $51.1 billion amount in a secondary offering to adequate capitalization.
Secondary Offering IPO would add Equity (cash) to the balance sheet, the secondary offering contributes the necessary capital to satisfy the FHFA requirement under the set capital rule. Keep in mind, new investors are buying earnings power of the business, the Shareholders are not giving away the company in a secondary IPO without a price; Investors are doing just that buying into the company.
Fair Market Value of the Earnings Power of the business $45.64 per share. (this calculation includes the 79.9% warrants converted to common stock). How much of a discount of the fair value the company would have to give up to attract new investors to participate in such a secondary offering I am not sure. The below example I will use a 15 percent discount.
Fannie Mae
07/29/2022
Reports $4.7 Billion for Second Quarter 2022
EARNINGS POWER OF THE BUSINESS
Market Cap $263 Billion
Fannie Mae’s common stock outstanding 1,158,087,567
$4.7 billion net income for the second quarter of 2022.
Fannie Mae’s net earnings $4.7 billion per quarter, a projection of $18.8 billion net per year.
With the WARRANTS: Fannie Mae’s common stock outstanding 1,158,087,567 diluted by the warrants at 79.9 percent adds a total of 5,761,629,686 shares outstanding…
$18.8 billion net / 5,761,629,686 = $3.26 per share of earnings,
PE Ratio of 14 x $3.26 = $45.64 per share intrinsic value,
Market Cap 263 billion / 5,761,629,686 billion shares = $45.64 per share intrinsic value.
Example: If the company is required an additional $51.1 billion as a capital requirement to reach the $107.5 billion of the 2.5 percent of total assets, and to make the secondary offering attractive the price per share could be at extreme discount of 15 percent and in this case the secondary offering would price at $38.79 per share;
$45.64 Per Share Intrinsic Value minus 15 percent = $38.79
$51.1 billion secondary IPO / $38.79 = 1,317,349,832 billion new shares.
After the secondary offering a total of 7,078,979,518 billion common shares outstanding.
Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 per share intrinsic value.
FROM A PRIVATE INVESTOR POINT OF VIEW:
Example with Warrants:
Estimated Net income per year $18.8 billion / 7,078,979,518 billion shares total after secondary offering = $2.65 per share net income per year; amount of net profits Fannie generates per year per share.
Secondary Offering priced at $38.79 per share minus $37.15 per share Intrinsic Value after secondary offering = $1.64; the new equity owners are buying $1.01 per share net earnings per year for $1.64 per share; $2.65 minus $1.64 = $1.01 per share.
Again, new investors are buying earnings power of the business, shareholders are not giving away the company in a secondary IPO without a price, Investors are doing just that buying into the company.
Market Cap 263 billion / 7,078,979,518 billion shares = $37.15 Per Share Intrinsic Value.
Treasury holds 4,603,542,119 billion shares x $37.15 = $171 billion.
Common Shareholders 2,475,437,399 billion shares x $37.15 = $92 billion.
Individual shareholders multiply number of shares x $37.15 = intrinsic value of your holding.
In my calculation no amount of dividends were added for the JPS. The JPS are on the books at a small amount of company equity in the amount of 19.1 billion. The JPS are not due any amount of accumulated backward dividends, every issue of JPS are Non Cumulative.
The advantage of the JPS is in a receivership; And receivership is not in discussion any longer.
Conclusion, the GSEs business model, simply there’s no better. So, Fannie Mae can issue, at a later date in time (no rush), Non Cumulative Preferred Stock replacing the higher dividend payment to the existing JPS at a lower payout rate. The JPS Shareholders receive Par Value with a New offering.
NOTE 1: The two companies sent to the Treasury $301 billion and of that $301 billion a portion of that money is an over payment of the principle and interest charge that should be a credit in cash to the company. During the Collins Case, that came before the SCOTUS, the calculated over payment was calculated in the amount of $29.5 billion between the two companies. An estimated approximate credit due to Fannie Mae $15 billion, in such a case the secondary IPO price per share would change in the example given above. In addition the warrants the Treasury holds should not be exercised, the Treasury has been paid in full, no reason the Treasury due 79.9% of the common stock of the company.
Note 2: The liabilities on the books of $4.3 trillion are backed by real property, it's not liabilities at all tangible assets.
The so-called cram down where the SPS is converted to common stock.
The Senior Preferred Stock held by the Treasury was not a perpetual equity investment in Fannie and Freddie at the moment in time when the companies were put in conservatorship. The misrepresentation or possibly the misunderstanding with the SPS is the fact the Liquidation Preference can be paid off by the companies and the SPS redeemed; And between both companies $301 billion paid to the Treasury more than enough pays the Liquidation Preference in full and cancels the SPS.
The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, This wording remains unchanged today. The misunderstanding came in the mind of investors when the two government agencies signed the 3rd Amendment between themselves taking all the NET WORTH of both Fannie and Freddie: AND by doing so the SPS has become a perpetual equity investment in the mind of many investors: AND RIGHTFULLY SO, for the monies paid to the Treasury has not be declared PAYMENT IN FULL.
The Facts remain the Liquidation Preference has been paid in full and the SPS should be cancelled.
IN ADDITION the Senior Preferred Stock cannot be converted to Common Stock or any class of Stock UNDER THE TERMS of THE AGREEMENT.
FOURTH AMENDED AND RESTATED CERTIFICATE OF DESIGNATION OF TERMS OF VARIABLE LIQUIDATION PREFERENCE SENIOR PREFERRED STOCK, SERIES 2008-2
FACT: The Liquidation Preference can be paid in full and the SPS canceled.
No 3 and No 4.
FACT: The Senior Preferred Stock can not be converted to common stock.
No 6 and No 7
Quote “ No Conversion or Exchange Rights
The holders of shares of the Senior Preferred Stock shall not have any right to convert such shares into or exchange such shares for any other class or series of stock or obligations of the Company.
No Preemptive Rights
No holder of the Senior Preferred Stock shall as such holder have any preemptive right to purchase or subscribe for any other shares, rights, options or other securities of any class of the Company which at any time may be sold or offered for sale by the Company.” End of Quote
The CEO'S OF BOTH COMPAINES ARE APPOINTED BY THE TREASURY; and for this reason, we as Shareholders have no representation of our rights as owners of our companies.
FACTS READ THE CONTRACT.
No one from the company has sent a letter to the Treasury stating the Liquidation Preference is paid in full and the Senior Preferred Stock canceled. Instructions are written in the contract to do so.
WRITTEN IN THE CONTRACT STATES THE MONEY SENT TO THE TREASURY PAYS DOWN THE LIQUIDATION PREFERENCE AND WITH THIS PAY DOWN THE SPS REDEEMED.
Link: https://www.fhfa.gov/Conservatorship/Documents/Senior-Preferred-Stock-Agree/FNM/SPSPA-amends/FNM-Fourth-Amended-Restated-Certificate-04-13-21.pdf