Fannie Mae-No Politics (FNMA)

[Rodney5]

Quote: "Only if Treasury agrees to amend the contracts to allow such redemptions. The seniors are and have always been non-repayable while the funding commitment exists." WRONG!

Kthomp, your argument has been the CONTRACT SPSPA doesn’t allow the pay down of the Liquidation Preference with the cancellation of the SPS. That maybe so under the terms of the contract but the Law does. The FHFA Director doesn’t need the Treasury approval.

Congress

HOUSING AND ECONOMIC RECOVERY ACT OF 2008

The Treasury did not take a Perpetual Equity Investment in the enterprises, the government said so themselves, temporary investment period!

Cumulative Senior Preferred Stock with a 10% coupon that’s redeemable. The money sent to the Treasury above 10% pays down the Liquidation Preference and the SPS cancelled by LAW!

The lawyers are stuck on the Senior Preferred Stock Purchase Agreement. APPLY THE LAW!

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.

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