Fannie Mae-No Politics (FNMA)

[MannSinger]

Page 27-Recapitalizing the GSEs-Already underway-Last line.

As described above, each GSE should remain in conservatorship until it has retained or raised sufficient capital or other loss-absorbing capacity to operate in a safe and sound manner. Potential approaches to recapitalizing a GSE could entail one or more of the following, among
other options:

* Eliminating all or a portion of the liquidation preference of Treasury’s senior preferred shares or exchanging all or a portion of that interest for common stock or other interests in the GSE;

* Adjusting the variable dividend on Treasury’s senior preferred shares so as to allow the GSE to retain earnings in excess of the $3 billion capital reserve currently permitted;

* Issuing shares of common or preferred stock, and perhaps also convertible debt or other loss-absorbing instruments, through private or public offerings, perhaps in connection with the exercise of Treasury’s warrants for 79.9% of the GSE’s common stock;

* Negotiating exchange offers for one or more classes of the GSE’s existing junior preferred stock; and

* Placing the GSE in receivership, to the extent permitted by law, to facilitate a restructuring of the capital structure.

Each of these options poses a host of complex financial and legal considerations that will merit careful consideration as Treasury and FHFA continue their effort, already underway, to identify and assess these and other strategic options.

Treasury recommends:
* Treasury and FHFA should develop a recapitalization plan for each GSE after identifying and assessing the full range of strategic options. (administrative)

* Pending that recapitalization plan, and as an interim step toward the eventual PSPA amendment contemplated by this plan, Treasury and FHFA should consider permitting each GSE to retain earnings in excess of the $3 billion capital reserve currently permitted, with appropriate compensation to Treasury for any deferred or forgone dividends.

https://home.treasury.gov/system/files/136/Treasury-Housing-Finance-Reform-Plan.pdf