Latest from Tim H., ROLG, and Midas/KT/LuLeVan:
TH: "While it is possible that the Supreme Court will rule that the net worth sweep is void ab initio and require it to be reversed, it is more probable that it will remand the Collins case to the Southern District of Texas for trial on the facts (or a motion to dismiss). A successful outcome for plaintiffs in either event likely will lead to a retroactive unwinding of the sweep, which for both Fannie and Freddie would result in the complete retirement of Treasury’s senior preferred stock (and the elimination of its liquidation preference), and leave Treasury owing somewhere between $12.5 and $15.0 billion to each company, which it most likely would pay as credits against future federal income taxes. This overpayment range has the estimate I calculated at the time the net worth was suspended (and the “overpayment clock” was stopped) of $12.5 billion at the low end, and the $15 billion number I’ve heard David Thompson cite at the high end. If you had to pick one number, I’d go with David’s."
ROLG: "this overpayment amount should bear prejudgment interest from date the NWS distributions exceeded the amount needed to pay off senior stock through the date of payment, so even David’s number might grow over time."
Tim H.: "My experience with prejudgment interest is that it’s something plaintiffs ask for but the court doesn’t always grant. It’s also possible that the difference between my $12.5 billion and David’s $15 billion IS prejudgment interest, which I didn’t include in my calculation. If so, that means David’s number WOULD grow over time."
MIDAS: "For some color here, I made a spreadsheet that calculates what the senior pref balance would have been for each company had they paid down the seniors (and had the ability to do so) with every penny available past the 2.5% quarterly dividend.
I got a total overpayment of $14.2B for Fannie, with the 10% moment hit in Q3 2018, and a total overpayment of $14.7B for Freddie, with the 10% moment hit in Q2 2017. My numbers don’t quite agree with FHFA’s published tables so they aren’t exact, but they do evidently agree with David Thompson by what Tim said."
