Fannie Mae-No Politics (FNMA)

[kthomp19]

Page 2731 Capital distributions while in conservatorship.

(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.

You might want to read page 2731 again. At the bottom it says:

‘(e) 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.

That doesn't apply because FHFA has suspended capital classifications during conservatorship, meaning that the term "undercapitalized" (which has a specific meaning in HERA, not a general one - see 12 USC 4614(a)(2)) doesn't apply.

What you actually quoted was 12 CFR 1237.12(a). But you left out part (b):

(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:

(1) Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;

(2) Will contribute to the long-term financial safety and soundness of the regulated entity;

(3) Is otherwise in the interest of the regulated entity; or

(4) Is otherwise in the public interest.

All FHFA had to do was say that the NWS dividends (and even the pre-NWS 10% cash dividends) were in the public interest, so #4 applies and your whole theory crashes.

So you got the source wrong, and your argument (that the dividends violated the law) is also wrong because you ignored (b)(4).