Fannie Mae-No Politics (FNMA)

[GAK-]

From Calabria's own pen:

https://www.cato.org/publications/working-paper/conservatorships-fannie-mae-freddie-mac-actions-violate-hera-established


"Among the Treasury and FHFA departures from HERA and established precedents are the following:... disregarding HERA's requirement to “maintain the corporation’s status as a private shareholder-owned company” and FHFA’s commitment TO ALLOW PRIVATE INVESTORS TO CONTINUE TO BENEFIT FROM THE FINANCIAL VALUE OF THE COMPANY'S STOCK AS DETERMINED BY THE MARKET" (Calabria and Krimminger, p. 2-4)

"Despite having been repaid far more than it injected into the Companies, TREASURY HAS IGNORED THE CREDITOR PROTECTIONS REQUIRED UNDER HERA OR, FOR BANK SHAREHOLDERS AND OTHER STAKEHOLDERS, under the FDIA by using the conservatorships to strip all value from the shareholders, rather than complying with the HERA requirement that it "preserve and conserve" the Companies for the benefit of all stakeholders." (Calabria and Krimminger, p. 12)

"While the PSPAs were certainly dilutive of the existing shareholders’ interests in the Companies, THE FACT THAT SUCH PRIVATELY HELD SHARES CONTINUED TO EXIST IN COMPANIES THAT CONTINUED TO OPERATE AND GENERATE SUBSTANTIAL CASH FLOW IMPLIED A CONTINUED RIGHT TO RECOVERY and were consistent with a potential return to full private control." (Calabria and Krimminger, p. 15)

"shareholders and other stakeholders were to incur losses consistent with their protection under bank insolvency statutes. The value of the bank was not stripped by the FDIC. The FDIC [Calabria’s model for FHFA] RECOGNIZED THAT THE SHAREHOLDERS WERE TO BE DILUTED, BUT ONLY TO THE EXTENT OF THE ASSISTANCE ACTUALLY PROVIDED BY THE FDIC. If the assisted bank returned to profitability, that was success, and after the repayment of the FDIC's assistance all future value would inure to the benefit of the shareholders." (Calabria and Krimminger, p. 31)