Fannie Mae-No Politics (FNMA)

[Rodney5]

Your argument doesn’t work anymore, we see right through your smoke and mirrors. The mistake of the lawyers over and over has been the focus on the SPSPA.

THE LAW 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.

The problem with Professor Epstein his evaluation focused on the contract SPSPA between two government agencies. All he had to do was to apply the LAW WRITTEN IN HERA: with that being said doesn’t change the fact in what the Professor wrote is the ABSOLUTE TRUTH.

According to Professor Richard Epstein
The Senior Preferred Stock would have been redeemed.

Quote “The conflict of interest took a more ominous turn with the adoption of the Third Amendment between FHFA and Treasury nearly four years later. At that time, the market had quieted down, and the GSEs were making timely dividend payments on Treasury’s preferred stock. Nonetheless, FHFA and Treasury ripped up the old agreement, and substituted in its place a new deal that created a “net worth sweep” whereby all of the funds received by the GSEs were paid over to Treasury as a dividend, even in amounts far in excess of the original 10 percent dividend. The consequences have been huge. Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed. With the Third Amendment, about $128 billion that could have been used to redeem the preferred shares has been reclassified as a dividend payment, rather than a return of capital.” End of Quote

Please Note: “Without the Third Amendment, virtually all the senior-preferred stock would have been redeemed.”

Link: https://ricochet.com/326448/fannie-freddie-fiasco/

HOUSING AND ECONOMIC RECOVERY ACT OF 2008

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