Fannie Mae-No Politics (FNMA)

[kthomp19]

The Senior Preferred Stock held by the Treasury was not a perpetual equity investment in Fannie and Freddie at the moment in time when the companies were put in conservatorship.

Technically correct. The seniors are a perpetual equity investment, but they didn't come into existence until a few days after conservatorship started.

The pay down option of the Liquidation Preference and cancel of the SPS was worded in the documentation between the Treasury and the Companies at the time when Fannie and Freddie were put in conservatorship, this wording remains unchanged today.

Correct. That wording says FnF cannot pay down increases to the liquidation preference due to draws, which is what caused all the increases on the balance sheet (from the first draw in 2008 until the letter agreement in September 2019), prior to the termination of the funding commitment. It's spelled out clearly in Section 3(a) of the contract.

Prior to termination of the Commitment, and subject to any limitations which may be imposed by law and the provisions below, the Company may pay down the Liquidation Preference of all outstanding shares of the Senior Preferred Stock pro rata, at any time, out of funds legally available therefor, but only to the extent of (i) accrued and unpaid dividends previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference and (ii) Periodic Commitment Fees previously added to the Liquidation Preference pursuant to Section 8 below and not repaid by any prior pay down of Liquidation Preference.

Not a perpetual investment when the companies have the right to pay it off.

They only have the option to pay it down in very specific and limited circumstances, none of which have actually happened yet.

Pay down option of the Liquidation Preference,
option
option
option ... Get it? they have the option.

Again, read the entire contract to gain the necessary understanding. Section 3, titled "Optional Pay Down of Liquidation Preference", spells out exactly under which circumstances FnF can pay down the seniors.

Your implication seems to be that the mere existence of a section with that title means FnF can pay down any amount of senior pref liquidation preference any time they want, and that implication is entirely incorrect.