Fannie Mae-No Politics (FNMA)

[Wise Man]

EXHIBIT A: Dividends are a Change in Equity.
The Income Statements reflect the result of operations during a period. The bottom line is Net Income. A different financial statement is the Balance Sheet, a picture of a company at a determined date.
There are two exceptions when changes in Equity must be reflected on the Income Statements, but separately from the operations during the period ("outside").

Under accounting rules, the companies are compelled to put more data in the Income Statements, so the shareholders have a better picture of what has happened with their companies during the period, that otherwise would go unnoticed and give a false impression about the financial health of their companies.
This is why FnF don't post only the Net Income that would make the companies be subject to the current con operation by renowned hedge fund managers that make a Guirdo write:

They have consistently earned over $10 per share the last 11 years

Primarily, they post the Comprehensive Income, comprised of the Net Income mentioned before, plus Other Comprehensive Income (OCI), despite being a Change in Equity account (Fair Value gains/losses in available-for-sale securities, an Accounting Standard chosen to avoid posting volatility in Earnings -EPS-. FnF have chosen other accounting standard "trading securities" for their Investments Portfolios, and PLMBSs no longer exist)
Both accounts are later posted on the Balance Sheet (Equity), Retained Earnings account and AOCI account, respectively (both Common Equity by the way).

The dividend payments don't appear on the Comprehensive Income, because they are a compensation to owners (Preferred Stock holders with "other ownership interest" in FnF).


A dividend is a Change in Equity (Balance Sheet), distribution of earnings. It isn't a result of operations during the period, like the interest payments, administrative expenses, etc. and they don't show up on the Income Statement.
Freddie Mac:


Secondly, continuing with the idea of being compelled to write all relevant info on the Income Statements, the companies post an additional extended version with the Net Income Attributable to Common Shareholders, after subtracting the dividend payments or other capital distribution to the Preferred Stocks. The reason why the SPS LP increased for free as compensation to Treasury in the absence of dividends, does show up. Outcome: $0 EPS.


The common shareholders own the entire companies and there is no need to show the compensation to themselves, just what is left after the payments to "the others".

This is all available information that affects the common shareholders, but FnF forgot to include this latest operation "gifted SPS LP" as a Change in Equity or in the Net Worth Activity table, not just on the Income Statements.
The reason is because it carries an offset (reduction of Retained Earnings -Comprehensive Income-) that would uncover that FnF are building SPS, not regulatory capital (Retained Earnings account) and, the key, necessarily this Common Equity (Retained Earnings) is held in escrow, in order to comply with the exception to the Restriction on Capital Distributions (gifted SPS) in the CFR 1237.12.
It's also helping the plotters to peddle the "release from Conservatorship" slogan, with a false "rehabilitation of FnF" (Fannie Mae CEO) and "FnF continue to build capital through Retained Earnings" (Ackman and his subordinate Glen Bradford), based on the Financial Statement fraud pointed out.


Besides Financial Statement fraud, there is another Securities Law violation. Although as part of the Separate Account plan, it was used a dividend payment when there was no Earnings available for distribution, out of an Accumulated Deficit Retained Earnings accounts.