Monday, October 31, 2022 2:05:36 PM
This clause can only ever either be neutral to Treasury or a benefit to them. It gives Treasury optionality.
Remember that this clause was agreed to in 2008. If Treasury somehow faced a situation that would give them an advantage by exercising that clause they could have done so.
As things have actually turned out, exercising this clause would cause Treasury to:
1) Send back $110B in cash (the difference between FnF's $191B in draws and $301B in dividends paid)
2) Lose the senior prefs with their $272B (and counting) of liquidation preference and eventual rights to the lesser of 2.5% of FnF's net income and their entire net worth increase every quarter (once they reach their capital requirements under the ERCF)
3) Lose the warrants for nothing
4) Cede all control over when and how FnF exit conservatorship
You tell me why Treasury would ever choose to do that.
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