"Conservatorship", the Conservator and the Treasury agreed to not uphold the FHEFSSA section 1367 (as amended by HERA) that contemplates the termination of the conservatorship through the Conservator's Power of recapitalization: "Put FnF in a sound and solvent condition", U.S. Code §4617(b)(2)(D), to weather future storms, because there's no other provision that would prompt the termination of the conservatorship established for Critically Undercapitalized enterprises. HERA restricts the Capital Distributions when FnF are undercapitalized, 12 U.S. Code §4614(e) (something omitted in all the lawsuits), with the exception: "to reduce the financial obligations with respect to ownership interest", that is, the Senior Preferred Stocks -SPS-. The definition of Capital Distribution is "any dividend with respect to any shares (common stock) of, or other ownership interest (JPS and SPS) in, an enterprise”. 12 U.S. Code §4502 (5). When the SPS were expected to be reduced (redeemed) soon (I estimate it was in 2013 in the case of Freddie Mac and 2014 for Fannie Mae), the FHFA and the U.S. Treasury needed another exception that would allow the enterprises to continue to make Capital Distributions, otherwise the dividends would have had to come to a halt once the SPS were fully redeemed (repaid). That's why on July 2011 the FHFA approved a rule (12 CFR 1237.12) that included another exception: (1) to recapitalize FnF. HERA allowed an unlimited dividend yield on the obligations temporarily authorized to purchase by the U.S. Treasury incorporated in their Charters, 12 U.S. Code §1719 (g)(1)(A), but, prior HERA, there was already in the Charter an Authorization Of Treasury To Purchase (Redeemable) Obligations, 12 U.S. Code §1719 (c), at a rate similar to Treasuries (limited to $2.25 billion set 40 years ago, so Congress just had to update it), subsection included as an exception to the Charter's provision "Fee Limitation", 12 U.S. Code §1719 (f), that bars the U.S. Govt from levying a fee or charge on or with regard to the purchase, sale, issuance, guarantee, pledge of any mortgage, asset, obligation or other security by the corporations. That is, the U.S. Govt can't profit from FnF's securities other that the small rate on obligations mentioned (c), because it isn't included (g) -unlimited yield- as an exception. This provision Fee Limitation is being currently violated with the TCCA fees and the fees allocated to two Housing Trust Funds managed by the Treasury and HUD for Affordable Housing matters. First of all, we have to understand that FnF are Congressionally Chartered Private Corporations with a Public Mission (outlined in the Purposes section of the Charter. 12 U.S. Code §1716). There's no way a private corporation can be tasked with a Public Mission that makes them take on more credit risk, without some sort of backstop by the Government. This backstop is the aforementioned original Authorization Of Treasury To Purchase (Redeemable) Obligations. The only way to make legal the Government's actions to some extent, is considering the 10% and NWS dividend as schemes of faster repayment of the SPS and recapitalization, according to the exceptions to the Restriction On Capital Distributions, because there's no fastest gear than a NWS dividend. This scheme is called The Secret Plan, that would also uphold the Conservator’s Power. The SPS could have been purchased under the subsection (c) and not (g), but The Secret Plan wouldn't have been possible (low dividend yield). With this Secret plan, there's no Government theft as all the plaintiffs claim to get a compensation and make up for their losses due to the dividend suspended. As a side note, it's worth mentioning why the NWS was approved in 2012. It replaced the 10% dividend because it was ill-conceived, as the dividend made the enterprises post a loss (Capital Deficit) that prompted a Treasury draw and a subsequent increase of the SPS which, in turn, made them pay a higher dividend amount the next quarter. Then, more losses, more draws, etc. A vicious circle. It was solved with the NWS dividend, as now they can't pay more dividends than their earnings reported. Due to the "cumulative" feature of the SPS's dividend, the actual low-rate dividend will be payable once FnF are Adequately Capitalized, as now any dividend is restricted. This Secret Plan can't be fully legal because it's a breach of the Conservator's fiduciary duty, under the traditional view of a Conservator and HERA's succession provision. That is, it should have been made public.
In part, I agree that "paying the US Treasury" a dividend violates the spirit of the conservatorship.."conserve and preserve".
And, the payment of this dividend to the US Treausry was illegal, because dividends were prohibited while in conservatorship.
