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londonricky, Thanks for this post. Great find.
United States: Treasury Seizing Profits From Fannie Mae And Freddie Mac In Violation Of The Law?
Last Updated: July 29 2013
Article by Joseph A. Woodruff
Here's a good story: A business runs into a serious crisis-a fire, or flood, whatever, the detail is less important than the magnitude of the problem, which is an existential threat to the continuation of the business. Along come some guys with lots of cash willing to become "silent partners" in the business. They offer all the cash the business needs to get back on its feet in the form of both a loan and stock purchase, but in return they want a guaranteed 10% "interest" plus a pro rata share of the profits of the business. The company already has both common and preferred classes of stock and agrees with the "money-guys" that their 10% guaranteed return will be treated as "special preferred" stock. The balance of their investment will be common stock equal to 80% of that entire class of shares.
With this new capital, the business repairs the damage done by the disaster, purchases new equipment, improves its operations, and not only continues in business, but actually turns the corner and starts to make a profit. It pays the 10% premium due on the "special preferred" stock and tells the CFO to calculate the dividend payments due to the holders of preferred and common stock.
Sounds like an American success story, right? Risk capital reaping its just reward! Well, not so fast.
One day the "money guys" show up at company headquarters and tell the CEO: "Nice business you got here. It would be too bad if something were to happen like that fire a few years ago. So, tell you what we're going to do, instead of us getting our 10% plus our 80%, we're going to get 100% of the profits, not just this year but every year from now on. And, by the way, don't even think about paying us back our investment, because you won't have any money left to do that."
This sounds like a story line from The Sopranos that could be played out over an entire season of thrilling home entertainment. Instead, it is the reality of the federal government's most recent assault on the rule of law.
Former U.S. Solicitor General, Theodore Olson, writing for the Wall Street Journal, provided an excellent summary of what the government is up to: "The federal government currently is seizing the substantial profits of the government-chartered mortgage firms, Fannie Mae and Freddie Mac, taking for itself the property and potential gains of private investors the government induced to help prop up these companies."
Investors are fighting back with lawsuits seeking money damages and injunctions to stop the Treasury from continuing to sweep Fannie's and Freddie's earnings into the federal coffers. Institutional investors, including mutual funds, insurance companies and other owners of preferred securities have sued in federal court, claiming that the Treasury and the Federal Housing Finance Agency have exceeded their statutory authority, breached the contractual rights of the preferred shareholders, and breached the fiduciary duty owed to investors arising out of the conservatorship into which the mortgage GSEs were placed. Read a copy of the complaint filed in one such lawsuit here.
Whether or not these lawsuits are meritorious, the consequences of the Treasury's actions on financial institutions promise to be profoundly bad and far reaching. Banks have long been encouraged to hold preferred stock in Fannie and Freddie as part of their regulatory capital. What will be the impact on those banks if these investments are now worthless? How will the government's actions impact Fannie and Freddie's ability to return to profitability? And what does this conduct say about the Administration's adherence to the rule of law?
Legislation has been introduced, under the guise of protecting taxpayers, that would retroactively legalize the government's actions. If the Treasury and FHFA were not acting beyond legal bounds, why is such legislation even needed? And why are supposedly conservative Republicans supporting it? These questions demand answers.
Theodore B. Olson: Treasury's Fannie Mae Heist
The government asked investors to shore up the two mortgage giants. Now those investors are being stiffed.
By THEODORE B. OLSON
The federal government currently is seizing the substantial profits of the government-chartered mortgage firms, Fannie Mae FNMA -4.35% and Freddie Mac, FMCC -1.36% taking for itself the property and potential gains of private investors the government induced to help prop up these companies. This conduct is intolerable.
Earlier this month I filed a lawsuit to stop it, now known as Perry Capital v. Lew, and other lawsuits challenging the government's authority to demolish private investment are stacking up. Perhaps it's time for the government to change course.
When the nationwide mortgage crisis first took hold in 2007 and 2008, Fannie and Freddie shored up their balance sheets with some $33 billion in private capital, much of it from community banks, which federal regulators encouraged to invest in the companies. As the crisis deepened, the government determined that Fannie and Freddie also needed substantial assistance from taxpayers. Congress passed the Housing and Economic Recovery Act of 2008, and under that law the government ultimately plowed $187 billion into the companies.
Taxpayers should get their investment back, but once they do, so should the private investors who first came to Fannie and Freddie's aid. The government's scheme to wipe out these investors is bad policy and a plain violation of the law that respects private, investment-backed expectations and our constitutional protection of property rights.
Enlarge Image
David Gothard
When the government intervened in Fannie and Freddie in 2008, it faced a choice: It could place the companies into a receivership and liquidate them, or it could operate them in a conservatorship and manage them back to financial health. Conservatorship, the government agreed, offered the best chance of stabilizing the mortgage market while repaying the taxpayers for their investment.
Today, Fannie and Freddie are back. Last quarter, Fannie announced a quarterly profit of over $8 billion; Freddie made $7 billion.
Rather than allow private investors to share in these profits, the federal government unilaterally decided to seize every dollar for itself. Last summer the government changed the terms of its investment from a fixed annual dividend of 10%—a healthy return in this market—to a dividend of nearly every dollar of the companies' net worth for as long as they remain in operation.
So, at the end of last month, Fannie and Freddie sent a whopping $66 billion to the Treasury as a dividend. None of this money went to pay down the government's investment. Whatever amount of money the government takes out of Fannie and Freddie, the amount owed to the government is never to be reduced, meaning there can never be any recovery for private investors.
It's a splendid deal for the government: The president's budget estimates, over the next 10 years, that the government will recover $51 billion more than it invested in the companies—and that's on top of tens of billions in dividends the government took out of the companies from 2008-12. But it's a complete destruction of the investments of private shareholders.
That is unlawful for at least three reasons. First, the government's authority to revise its investments in Fannie and Freddie expired more than three years ago. Its change in the payment structure was utterly lawless.
Second, the Housing and Economic Recovery Act expressly requires the government to consider how its actions affect private ownership of the companies. The government has evidently given no attention to that requirement.
Third, that same law requires the government, operating Fannie and Freddie as a conservator, to safeguard their assets, but the government's new dividend scheme conserves nothing. In fact, the government has acknowledged it intends to facilitate the companies' ultimate liquidation. That is the opposite of conservatorship and it violates virtually every limitation that Congress imposed on the government's authority to intervene in Fannie and Freddie.
Some have suggested that this illegal extinction of private investment is justified by the extraordinary levels of support that taxpayers provided to Fannie and Freddie during the financial crisis. Certain recent legislative proposals even purport retroactively to legalize the government's cash-grab in the name of ensuring the taxpayers are repaid. But the companies' return to profitability means that taxpayers likely will be repaid in full, with interest, by the end of next year.
In these circumstances the right thing to do is to permit the companies to pay down what they owe to the government's investment so that private investors also might have the opportunity to earn returns on theirs. Yet, the "right thing" here is not just what the law requires. It may benefit the taxpayers as well. If Fannie and Freddie ever return to private ownership, the government has rights to 80% of the companies' common stock.
The government's recent cash grab squanders that opportunity, but it threatens even more serious harms. The United States has the most liquid securities markets in the world only because of its strong commitment to the rule of law and respect for private property. The government's actions here are an affront to those commitments.
Mr. Olson, a former U.S. solicitor general, is a partner at Gibson, Dunn & Crutcher.
Great Find HK Investor. I'm posting the link to the Forbes article.
http://www.forbes.com/sites/tedkaufman/2013/07/22/washington-cant-defuse-the-ticking-time-bombs-fannie-mae-and-freddie-mac/
Obiteridctum. Great post and great article. I always appreciate your well thought opinions and fact based posts. It helps maintain calm on a board that can be filled with at times a lot of nonsense or misinformed folks.
Just saw them ring the opening bell at NYSE!!
Thanks for sharing info on the opening bell ringing this Monday. Have a great weekend!
I agree with you. I'm hoping that Mel Watts does get in. There is cloudiness with where he stands; however, he and our friend Maxine Waters are good friends. Maxine appears to understand the true issues surrounding FnF and appears to have an open mind to the GSE's returning IMHO. She even let Ralph Nader speak at the recent GSE reform hearing that she held. She did not have to do this whatsoever thus, I believe that she has an open mind about the GSE's based on this and other hearings I have reviewed. I'm hoping that Mel Watts will too.
Waters gse reform second panel
Waters let's Ralph Nader speak please see 1:11:30 mark of video.
Musky5 Well Said. It's all a game within a game for some and others do not realize that they are a board being played on. I at least know that I am the board for now.
Wind down Will not occur. There will never be a consensus with this Congress. Please see Sen. Boehner to Sen. Reid go F@@@ yourself
Thanks. I'm gonna do that.
I'm thinking that we get released from conservatorship and recapitalized and then relisted and the shareholders get whatever out market value is which Blue and others have been posting. I'm hoping that we get at least around half of what they call for.
Thanks. Looking forward to the next few months. FnF about to roll with this news and Aug earnings and I believe October hearing from the US Federal Claims court. I'm interested in finding out when this Perry Capital Hearing is at the US District Court. This could change the course of my life and many others by the end of this year with one little announcement from FHFA director! GSE's will be released from conservatorship. Been doing my DD since January. I've been shook out of my shares a couple times but holding strong. The momentum is building!
Fannie, Freddie Sued by Hedge Fund
Hedge fund Perry Capital sued the federal government, charging it improperly moved last year to recoup the profits of Fannie Mae and Freddie Mac.
WASHINGTON—Hedge fund Perry Capital LLC sued the federal government late Sunday, charging it improperly moved last year to recoup the profits of Fannie Mae FNMA +4.38% and Freddie Mac, FMCC +1.97% the bailed-out mortgage-finance companies.
In a suit filed in federal court here, Perry Capital said a decision by the Treasury Department and Federal Housing Finance Agency last August to capture the profits of Fannie and Freddie violated the terms of the government's 2008 bailout agreement. The hedge fund is asking that the changes made to the bailout agreement last summer be set aside.
A spokesman for the Treasury couldn't be reached immediately for comment. A spokeswoman for the FHFA, which regulates Fannie and Freddie, couldn't be reached.
The suit comes on the heels of a broader lawsuit by a separate group of investors challenging various aspects of the government's 2008 seizure of Fannie and Freddie.
Investors have piled into the shares of the two firms in recent months as a rebounding housing market has resuscitated the fortunes of Fannie and Freddie, which have begun to report large profits. Fannie and Freddie, which purchase or guarantee mortgages, last month paid $66 billion to the Treasury.
Perry Capital hasn't disclosed its stake in the preferred shares of Fannie or Freddie, though a lawyer for the firm said Sunday that the firm had made a significant investment. Investors at Perry Capital had concluded in 2010 that the firms were likely to be profitable—a position that wasn't widely held at that time—and began buying up preferred shares that year, the lawsuit said. The firm isn't seeking any damages in the lawsuit but would benefit if the changes made last summer were ruled invalid.
The government took over Fannie and Freddie through a legal process known as conservatorship in 2008 as housing-market losses mounted. The government agreed to inject huge sums of capital to keep the companies afloat. In return, Treasury received a new class of "senior preferred" shares that initially paid a 10% dividend, as well as warrants to acquire nearly 80% of the firms' common stock. The government currently holds nearly $188 billion in senior preferred shares and has received nearly $132 billion in dividend payments.
Last August, the Treasury amended the stock-purchase agreement, instead requiring the firms to pay nearly all of their profits as a dividend to Treasury beginning this year. The firms don't have to make any dividend payments when they are unprofitable. As a result, the firms can't rebuild capital or redeem any of the senior preferred shares the government has taken.
That dividend "sweep" upended the bets of hedge funds such as Perry Capital. Sunday's lawsuit alleges that, as Fannie and Freddie were returning to profitability last year, the government "maneuvered to ensure that Treasury would be the sole beneficiary of the companies' improved financial position," the filing said.
Investors have been lobbying Congress to reprivatize Fannie and Freddie, which could also help their shares recover value. But absent such a revamp or a change of heart by the Obama administration, some experts see a legal challenge as the best, and possibly only, way for investors to have their bets pay off.
Sunday's lawsuit makes two broad arguments. First, it says that the dividend sweep amounted to a purchase of new securities, something the Treasury Department didn't have the authority to do beginning in 2010. Second, it alleges that the firms' regulator, as the conservator of Fannie and Freddie, overstepped its mandate to conserve the assets of the companies when it allowed all of their profits to go to the Treasury.
"This lawsuit seeks to uphold the rule of law," said Theodore Olson, partner at Gibson, Dunn & Crutcher and the former U.S. solicitor general, who is representing Perry Capital. "If the government wanted to assume the powers of receivership, it could have chosen that course. Instead it chose conservatorship, and with the 'sweep amendment,' it overreached."
BigBenWallace, Here's the article as requested.
Newsmaker
Newsmaker: Kelli Parsons, Fannie Mae
Frank Washkuch
July 01, 2013
Utilizing a proactive and transparent comms strategy, Fannie Mae's SVP and CCO managed to resurrect the organization's image and win back praise from the media.
Fannie Mae had some good news to spread in spring 2013. The mortgage finance company reported pre-tax income of $8.1 billion in the first quarter of the year on the heels of a $17.2 billion profit in fiscal year 2012, a record for the company.
It even received praise from the press when its billions of dollars in repayments to the Treasury Department helped to cut the federal deficit.
It's a far cry from 2008 when Fannie Mae and fellow financial services organization Freddie Mac were taken into conservatorship by the federal government and critics accused both firms of causing the financial crisis of that year and the Great Recession.
It's up to Fannie Mae SVP and CCO Kelli Parsons to ensure the press is talking about the role the company is now playing in the housing market's recovery and its payments to taxpayers instead of what she calls its “legacy issues” from the past decade. A key strategy: staying on offense, especially now that Fannie Mae is back in the black.
“Moving to profitability last year gave us more ways to tell our story. It made us highly relevant again to people, and then we really accelerated our progress story,” Parsons says. “[2012 was] our most profitable year ever, and it gave us the opportunity to communicate even more forcefully that we are repaying taxpayers and we recognize that the taxpayer made a significant investment in this company to keep it alive during the crisis.
2010-present
Fannie Mae, SVP and CCO, leading communications, marketing, engagement, and community investment
2008-2010
Warburg Pincus, VP of global communications and marketing
1998-2008
Hill & Knowlton, most recently as EVP and GM of H&K New York. Previously DC office leader and director of corporate practice
1991-1998
Various roles at different companies as a TV news reporter. Began in 1991 at WPSD Local 6 in Paducah, KY, before moving to WSMV in Nashville, TN , in 1993. Joined WA VE 3 TV, based in Louisville, KY, in 1994, before taking a job with KHOU-TV in Houston in 1997
“We went on offense in some ways immediately [in late 2010] in the sense that we needed to correct inaccuracies or misunderstandings about the company.
“That said, certainly when we were in a position of losing money, we were not as proactive and there were certainly days when we managed issues when there was a need to defend the company,” she explains. “Under my watch, we've been proactive from day one. It's essential that people have an honest, current view of Fannie Mae. It's more of a ‘just the facts' approach, so people understand the facts about us.”
In many ways, that's easier said than done. Fannie Mae has a unique and complex business structure, complicated even in today's world of multinational conglomerates.
Simplified messaging
Parsons and her team have to explain the role the government-sponsored entity plays in the housing market and the economy at large, not to mention the ins and outs of its oversight by the federal government.
With that in mind, the company has boiled down its mission to a few bite-sized statements. On Fannie Mae press releases, instead of paragraphs of minutiae-filled boilerplate statements, they find the following sentence: “Fannie Mae enables people to buy, refinance, or rent a home.”
“Everyone in the company can connect what they do every day to one of two [priorities],” Parsons adds. “[They can say] ‘my work contributes to the recovery or it contributes to the technologies, business practices, or activities that will make the housing system more sustainable going forward.'”
The differences between Fannie Mae and most corporations do not end there.
Fannie Mae's Washington, DC, headquarters is a working office to be sure, but has the look of a tourist attraction. The Colonial Revival-style building is tucked away in the district's Cathedral Heights section near the Sidwell Friends School.
Unlike most for-profit businesses, a portion of Fannie Mae's profits go to the federal government in the form of reimbursements. It also creates advertising only to help consumers know their options and not for branding. The company does not have a PR AOR, but works with firms on a project basis.
Focus on CSR
Fannie Mae detailed much of its2012 CSR work, which included educational efforts for hundreds of thousands of at-risk borrowers, in a progress report released in April.
In initiatives approved by the company's regulator, it provided foreclosure-prevention counseling for more than 215,000 at-risk borrowers, which it said helped more than 65,000 families avoid foreclosure.
More than 6,700 homeowners also received post-foreclosure counseling, and more than 38,000 potential homebuyers took part in pre-purchase education. The company also acquired more than 4,000 foreclosed properties and rehabilitated more than 2,400 houses.
This year, the company instigated a week-long CSR program called 7 Days to Serve. The initiative ran from June 9-15 and included projects with a housing theme.
With these complications, Fannie Mae's communications team focuses on talking about its recent positive upturn and the work it does to help consumers buy or stay in their homes. Parsons says her group has to worry less about prior hurdles, such as the company's 2010 delisting from the New York Stock Exchange, the Securities and Exchange Commission's 2011 civil charges against former CEO Daniel Mudd, or its role as a punching bag in recent elections.
“It's important to do our very best with the things we can control or influence in an appropriate way, and not to let the other things get us down,” she explains. “Most of the negative coverage of the company – there's little now; it's moved to positive or balanced reports – is focused on legacy issues. At times, we need to address that.
“We don't tell people [financial troubles] will never happen again, but we do quantify the actions we have taken to remove much of the risk in the company.” Parsons, who previously served as head of global communications and marketing at private equity firm Warburg Pincus after a decade at Hill & Knowlton, says she classifies jobs by how much fixing, maintaining, and building is involved in the position.
Rebuilding the comms unit
Noting that she has little interest in a role solely “maintaining” a company's communications, Parsons explains that her position at Fannie Mae requires her to fix things that were broken and build out the company's communications function.
This includes rebuilding the team's confidence so it can take on the challenges facing it. “When the company went into conservatorship, it stopped communicating as extensively. So a top priority when I got here was to assess the team, enable the people that stayed with us to grow professionally, build their confidence back up, and be communicators again,” she explains.
“And then we needed to attract some new top talent to the company and restructure the communications function.”
Since Parsons joined the team in August 2010, Fannie Mae has tried to increase transparency among its workforce with a digital focus, using the Fannie Mae Progress website to track financial development. To that end, the business also employed executive blogs, a revamped intranet, and an employee-recognition program that rewards model behavior. Parsons also conducted a full assessment of its communications team to help current employees mature and add new personnel to the team.
A second priority after Parsons joined the organization – shortly after it was delisted from the NYSE – was to rebuild its relationship with the media, which in turn helped stakeholders understand the changes taking place at Fannie Mae. Since most of the company's work is b-to-b, it has focused on business media outlets such as The Wall Street Journal and CNBC.
“She takes a thoughtful, methodical, and strategic look,” says Fannie Mae corporate communications VP Maureen Davenport, who has worked with Parsons at both her current company and also at H&K.
“Even in really tense moments when we need to take action clearly, she has the unique ability to step back and make sure we have considered all of the potential options and whether this is the right path forward.” Davenport explains that although Fannie Mae had a small window for introducing then-incoming CEO Tim Mayopoulos last year, it conducted a comprehensive rollout that tied the announcement to the organization's larger business strategy. “Kelli joined Fannie Mae when we were losing billions of dollars a year. We recently reported record pre-tax income of $8.1 billion for the first quarter of 2013. Under Kelli's leadership, communications is a strategic component of our turnaround,” explains Mayopoulos.
“As we fixed the company and began the path back to profitability, she authored a strategy and message to lead change, foster common purpose among our employees, and communicate our remarkable progress.” After covering crises from Hurricane Andrew to the humanitarian crisis in Sarajevo as a TV news reporter, Parsons' work at H&K included providing counsel to clients including the nation of Pakistan and onetime tech giant Compaq during a 10-year tenure at the agency.
More than 2,000 employees volunteered approximately 24,000 hours of their time last year for Fannie Mae's Help the Homeless initiative.
Parsons says she learned how to manage a business during her time at H&K, eventually running the agency's Washington, DC, and New York offices. She joined Warburg Pincus as its VP of global communications and marketing in 2008. There, Parsons had to explain the role of the company and differentiate it from others in a sometimes hostile media environment. She also managed marketing at Warburg and worked with members of the board of directors and other executives to help them understand the value of communications when faced with challenges.
Providing the best counsel
“It was important to help people understand the value the firm brought because private equity, like most areas of financial services, was under attack,” she says. “Part of my remit at Warburg was to differentiate it from others and show that the company was a growth investor.”
Parsons adds that her experience on the agency side counseling executives on how to rebuild businesses would come in handy years later. Prominent H&K clients during Parsons' tenure were the US-Arab Economic Forum, VeriSign, and the London 2012 Olympics bidding committee.
“Being able to work with clients who had really significant challenges and having the responsibility and courage to provide them with my very best counsel, and to see the outcomes of that, was an extraordinary experience and one that I call on when I advise our CEO today,” she explains.
Paul Taaffe, then chairman and CEO of H&K and now head of communications at Groupon, praised Parsons' efforts on the HP account. “The world of communications doesn't always breed people with the highest integrity, but she has amazing integrity,” he says, adding that she built loyalty from colleagues and clients alike.
Thanks for this post! This is very interesting and should be good news for us shareholders. I'm looking forward to a positive outcome for us based on this lawsuit and the other 41 billion lawsuit in US Federal Claims Court.
Nogoodtrader and Mr. Fence Thanks for the awesome post! Investors will have their day soon! I'm feeling that October lawsuit will be in our favor and then the share price will go to the moon :)
Great find here by King of Kings. Thanks for posting this. Here's the link to Let the GSE's Pay us Back Act of 2013.
http://www.govtrack.us/congress/bills/113/hr2435
Bonds Tied to Mortgages Poised for the Biggest Losses Since 1994
This is just another example of how hard it is to get rid of FnF. There is just no real appetite for the MBS in the private market. imho
Here's the link
http://www.businessweek.com/news/2013-06-28/bonds-tied-to-mortgages-poised-for-the-biggest-losses-since-1994
Fannie Mae, Freddie Mac Paying Back Treasury At A Rapid Pace
June 21, 2013 By Michelle Jones
It looks like Fannie Mae and Freddie Mac will start earning a profit for the U.S. government by sometime next year or the year after. That’s in spite of the government’s concerns about both business’ earnings last year.
Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) may have the government all paid back by next year, according to Hamilton Place Strategies. If the projection is true, that tidbit is especially interesting in light of lawmakers’ discussions about what to do with the two government-sponsored entities.
Fannie Mae, Freddie Mac To Become Profitable?
The Washington Post’s Lydia DePillis reports on the firms projections, which indicate that cumulative payments to the U.S. Treasury will surpass the government’s initial investments by early next year. The firm cites “reduced credit losses, increased earnings and a recaptured deferred tax asset.”
According to Hamilton Place, the U.S. taxpayer may see as much as $118 billion in profits from the government’s takeover of the two institutions by 2016.
Talks About Fannie Mae And Freddie Mac
Lawmakers have been discussing what to do with Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). Hedge funds have lobbied for the two organizations to be privatized once again. Lawmakers however, might have different ideas.
There’s been talk of winding down the two organizations and replacing them with new mortgage agencies. Investors in both Fannie Mae and Freddie Mac could lose all of the money they invested in the two companies. They sued the U.S. government earlier this month. The suit does say that it was beneficial to the economy for the government to take over the two companies.
However, it alleges that the Federal Housing Finance Agency (FHFA), which was the government entity which took over Fannie Mae and Freddie Mac, trampled the private ownership rights of shareholders.
Fannie Mae And Freddie Mac Have Improved
A new report from the FHFA was released this month. The report was the agency’s 2012 report on Fannie Mae / Federal National Mortgage Association (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC). In that report, the agency called both entities “significant concerns” in terms of their earnings. That’s still better than the year before however, when they were tagged as “critical concerns” in earnings. What a difference a year can make.
Well said. I'm definitely counting on that scenario. It makes perfect sense; especially, given the current state of our economy. No one in Congress wants to rock the housing boat now that a little bit of a recovery is occuring. Our economy is depending on this. There are too few private companies that want to deal with the 30 year fixed mortgages on their books. We know that eventually Congress will have to accept the fact that F&F are private entities and by rule should be released from conservatorship once they are fiscally solvent which should occur once they send back the 100 odd billion that is owed to Congress. FHFA lawsuits against big banks have proven that F&F were given a ton of mortgages that did not meet their standards. Congress even encouraged F&F and big banks to make sub prime loans a few years before the collapse. A shareholder lawsuit will remind Congress that they have responsibility in this. The greater awareness of these issues by public figures being market analysts, congress, and investors will return F&F back to the shareholders. I absolutely agree with you.
Reasonable,
I gotta hand it ya. You made a heck of a call for the 1.50's I not planning to see it drop like that. Kudos for sticking to your call and now I hoping that we see it bounce back and start to rise again.
Daxxer,
I'm working with fidelty's 401K account.
Daxxer,
My fidelity account only let's me buy 4,999 of fannie at a time. I do not know exactly why but I feel your frustration with it.
Thanks Mrfence.
I'm providing a link to the memorandum opinion for those who are interested.
http://legaltimes.typepad.com/files/collyer-opinion-2.pdf
MrFence,
Here's an opinion expressed by Judge Collyer which states that Fannie Mae is considered private.
"In the April 24 opinion, Collyer wrote that the appointment of FHFA as Fannie Mae’s conservator didn’t “transform Fannie Mae into a public agency.” Fannie Mae was chartered by the federal government, but historically has been treated as a private company, Collyer wrote. While there is no specific end date for FHFA’s conservatorship, Collyer wrote that because Congress didn’t give FHFA “permanent” authority over Fannie Mae, it couldn’t be considered a government actor."
Here's the link to the article.
http://legaltimes.typepad.com/blt/2012/05/in-employment-dispute-judge-rules-fannie-mae-is-not-a-federal-actor.html
This judge Collyer's opinion is the reason I decided to invest in the first place a while back. I believe that F&F are private companies and will be treated that way in a Federal court.
Great post obiteridctum! I concur with your assessment.
Great News!! Thanks for the post! This is the type of news that we have been anticipating and waiting to hear.
Thanks Gatortail. This post confirms that Fannie is a private entity and is viewed that way by a federal court and why I believe that F&F will be released from conservatorship or massive lawsuit to follow.
Fannie and Freddie have less loan risk than Private Capital.
Just something to consider. This is an older Senate hearing; however, it proves that GSE's held higher quality loans. Just another reason that Fannie and Freddie should stay.
I agree with you. They cannot violate the terms of the conservatorship without facing a lawsuit. The AIG lawsuit won by the common shareholders proves it and we all know that F n F are public entities just like AIG.
Thanks I signed the petition and posted on FB.
FAQ on Conservatorship
"A conservatorship is the legal process in which a person or entity is appointed to establish control and oversight of a Company to put
it in a sound and solvent condition."
"The purpose of appointing the Conservator is to preserve and cons
erve the Company’s assets and property and to put the Company in a sound and solvent condition. The goals of the conservatorship
are to help restore confidence in the Company, enhance its
capacity to fulfill its mission, and mitigate the systemic risk that has contributed directly to the instability in the current market. "
"Q: When will the conservatorship period end?
A: Upon the Director’s determination that theConservator’s plan to restore the Company to a safe and solvent condition has been completed successfully, the Director will issue an order terminating the conservatorship."
Fannie Mae is in a sound and solvent condition. The government will face most certainly face a massive lawsuit for violating the terms of the conservatorship if the shareholders are not justly compensated should they decide to liquidate the companies. IMO
CONSERVATORSHIP FAQ from FHFA website
This explains what conservatorship is.
http://www.fhfa.gov/webfiles/35/FHFACONSERVQA.pdf
Tadaaa,
Great article. I'm hoping for the same.
Agitlitz,
Thanks for the post that article sums it up in a nutshell.
Stervc,
That would be awesome. Thanks for your analysis!!
Yes, It is possible.
DeMarco was working on a plan to create an entity jointy owned by Fannie and Freddie.
Please see
http://www.nytimes.com/2013/03/05/business/fannie-freddie-in-venture-to-securitize-home-loans.html?_r=0
It is assumed that Corker will propose a bill that follows DeMarco's plan.
Please see
http://www.reuters.com/article/2013/05/29/usa-fannie-freddie-idUSL2N0EA1TB20130529?feedType=RSS&feedName=marketsNews&rpc=43
A joint venture solution would still be a good thing for us shareholders IMO.