Q. Okay. And were you aware that Grant Thornton was doing its own projections of the future
of foundation. This is also beyond the scope of the Discovery Order.
A. I mean, you know, I don't remember exactly, you know, did somebody say this or that or whatever. I
don't remember the specific comments, but I remember the general gist of conversation was in that kind of vein.
Q. (BY MR. THOMPSON) And was there a sense of this is a problem if we can't generate capital and
retain capital?
MR. LAUFGRABEN: Object to the form of the question.
How is this related to any of the topics in the Discovery Order?
MR. THOMPSON: Well, it relates to the profitability, was it a problem in the term of probability.
MR. LAUFGRABEN: We will instruct the witness not to answer this.
MR. THOMPSON: She is not your witness.
MR. BARTOLOMUCCI: Do you know what the question on the table is?
A. So why we've had a little bit of back and forth here.
Q. (BY MR. THOMPSON) So was there a sense that this was going to be a problem for Fannie going forward
that it was not able to retain capital?
MR. LAUFGRABEN: Same objection.
We're instructing the witness not to
answer, this is so far beyond the scope of the discovery order.
A. There were discussions about the pros and cons. In other words, what about it is good for Fannie, what about it may not be so good for Fannie, okay?
Q. Okay.
A. Sos, you know, one of the things, you know,
that is to the good is it did resolve this iterative borrow-to-pay-the-dividend issue that we've talked about previously.
You know, in my mind, the lack of capital accumulation meant that we had no -- we were building no financial wherewithal to take on unexpected events and losses, that we would be highly dependent on the Government -- even more-so dependent on the Government if an event, things like that happened in the future.
I didn't take in my own mind whether this
was a temporary -- you know, that we've got this -- you know, look, they put a second amendment in, they put a third amendment in, could there be a fourth amendment.
So things could change in the future, so
I didn't take it as a forever and ever amen necessarily.
It could be, but it didn't necessarily need to be. So I wasn't, you know, kind of trying to draw any conclusion.
It seemed odd to me that if what they wanted to do was wipe out the shareholders, why they didn't do that in inception of the conservatorship in the first place, because they left market speculation to occur in the marketplace.
So -- but time passes. Different people
and minds may think differently over time. So, you know, I wasn't assuming one way or the other that they were trying to wipe out the shareholders.
Q. Well, you said earlier that, well, you know, there was surprise and not surprise.
Was the not surprise because there was a sneaking suspicion that the Government wasn't going to let anyone else participate in the profits?
MR. LAUFGRABEN: Same objection as we specified before.
We would instruct the witness not to answer this question. It's far beyond the scope of the Discovery Order, and Counsel has not tied it to any topics in the Discovery Order.
MR. BARTOLOMUCCI: Do you want to restate the question?
MR. THOMPSON: Sure.
Q. (BY MR. THOMPSON) So was there a -- did you have the sense that the Government simply was not going to allow the private shareholders to participate in
future profits when you were at Fannie?
Do you think that was one of the possibilities that might ultimately come out?
MR. LAUFGRABEN: Renew our objections and our instruction to the witness not to answer.
Counsel still has not tied this to the Discovery Order.
MR. BARTOLOMUCCI: David, do you really want her to answer what was her sense of what the Government thought was possible?
MR. THOMPSON: Yeah.
I mean, it goes to the reasonable investment -- yeah.
Q. (BY MR. THOMPSON) I mean, from your perspective, you were dealing with the Government, and you said you weren't surprised totally by the net worth sweep.
I just really want you to explain why.
MR. LAUFGRABEN: Same objections, and same instructions.
A. I will tell you -- yeah. This is from my
vantage point. I am not presuming what the Government
was thinking or wanted. I am not trying to represent
anything from them. I may represent my perspective on
what they may have been thinking.
I just sat down with them -- to the
Treasury and said, "We think we're sustaining
profitable."
The numbers were decent-sized. I also
put on the radar that there was a possibility of a
deferred tax allowance release that could be sitting in
the not-so-distant future.
So the fact that this happened shortly
thereafter -- so the time -- the time connection there
was part of why -- that was part of why I wasn't
surprised. Okay. I just told them that.
So then the question is why would they be
concerned of us making money and creating capital inside
the enterprise. I think in my own opinion, a lot of --
a lot of people got wiped out, and the Government had to
step in on a lot of fronts during the financial crisis.
I think politically it seemed a little -- it would seem
to me that there would be individuals bothered that some
individuals might profit from the Government's support
of the enterprises, okay?
So, you know, it wouldn't -- would it
be -- how would it play out if somebody made big bucks
because -- off the backs of the taxpayers? I am kind
of -- how some people could connect dots that the Government stepped in, put a bunch of money into the GSEs using taxpayers' funds, and now Daddy Big Bucks over here is making a big profit off of Fannie Mae stock.
You could see how positioned that way,how that would be pretty politically unpalatable. I could see why there could be a concern that anybody plays things out that way. So, thus, why -- I wasn't trying to presume that they completely wanted to wipe out the shareholders, but I certainly would appreciate why there would be sensitivity of things playing out in a way that somebody would glob on to that story line.
Does that make sense?
AI
