Fannie Mae-No Politics (FNMA)

[Rodney5]

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE TUESDAY, JULY 15, 2008

STATEMENT OF HENRY M. PAULSON, JR., SECRETARY, DEPARTMENT OF THE TREASURY

Quote: “Fannie and Freddie play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.” End of Quote Page 6

Quote: “Our proposal was not prompted by any sudden deterioration in conditions at Fannie Mae or Freddie Mac. OFHEO has reaffirmed that both GSEs remain adequately capitalized.” End of Quote Page 6

Quote: “Let me stress that there are no immediate plans to access either the proposed liquidity or the proposed capital backstop. If either of these authorities is used, it would be done so only at Treasury's discretion, under terms and conditions that protect the U.S. taxpayer and are agreed to by both Treasury and the GSE.” End of Quote Page 6

Quote: “As I have said, we support the current shareholder-owned structure of these enterprises. Our plan addresses current market challenges by ensuring, on a temporary basis, access to both liquidity and capital, while also ensuring that the GSEs can fulfill their mission--a mission that remains critical to homeowners and homebuyers across the country, especially during this housing correction.” End of Quote Page 7

Link: https://ypfsresourcelibrary.blob.core.windows.net/fcic/YPFS/Senate-110-1008_2008.pdf

The above to THE UNITED STATES SENATE

” Yet he had a very different private message for Wall Street insiders."

EVIDENCE

Convincing evidence exists that the conservatorships of Fannie Mae and Freddie Mac were planned well in advance, and that they were intended to remove the companies permanently from private ownership.

Quote, “On July 11, the New York Times published a front-page article saying, “Senior Bush administration officials are considering a plan to have the government take over one or both of [Fannie Mae and Freddie Mac] and place them in a conservatorship if their problems worsen.”Shares of the companies plunged, and in response Paulson publicly pledged support for them on July 13, saying, “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies.”Yet he had a very different private message for Wall Street insiders. As reported by Bloomberg in November of 2011, Paulson met with a select group of hedge fund managers at Eaton Park Capital Management on July 21, where he told them that Treasury was considering a plan to put Fannie Mae and Freddie Mac into conservatorship, which would effectively wipe out common and preferred shareholders.This, of course, is precisely what happened six weeks later. End of Quote, From “Treasury, the Conservatorships, and Mortgage Reform” January 11, 2015

Treasury, however, lacked authority to put the two companies into conservatorship; only the new regulator, FHFA, could do that. And Treasury had kept neither the old OFHEO nor the new FHFA apprised of its nationalization intentions. Paulson was unaware that the FHFA had sent both Fannie Mae and Freddie Mac letters saying the companies were safe and sound and exceeded their regulatory capital requirements. Paulson told Lockhart that he had to change his agency’s posture on the two companies, and FHFA did exactly that. FHFA sent each company an extremely harsh mid-year review letter, and two days later, Paulson, Lockhart and Fed chairman Bernanke met with the companies’ CEOs and directors to tell them they had no choice but to agree to conservatorship.

When Paulson met with the directors of Fannie Mae and Freddie Mac to inform them of his intent to take over their companies, neither entity met any of the twelve conditions for conservatorship spelled out in the newly passed HERA legislation. Paulson since has admitted he took the companies over by threat. This fact has been stated in the Washington Federal Lawsuit filed against the government.
Page 30-31 Twelve Conditions

Link: https://docs.google.com/file/d/0BxUYhg0cYUOTbkZYVVJkaGtoS1E/edit?resourcekey=0-gU6I5hW3ndG5E3uY2VEyGA