Fannie Mae-No Politics (FNMA)

[Rodney5]

LuLeVan, written as plain as day, "Restriction on Capital Distributions.

HOUSING AND ECONOMIC RECOVERY ACT OF 2008

Page 2731
RESTRICTION ON CAPITAL DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—A regulated entity shall make no capital
distribution if, after making the distribution, the regulated
entity would be undercapitalized. The exception on the next page...


Quote: “Page 2732

EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.

NOTE: REPURCHASE, REDEEM, RETIRE...

WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.

Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf

In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.