Fannie Mae (FNMA)

[Wise Man]

The placement in Conservatorship is the only lawful action.
With (G) LOSSES, like to incur (fabricated) losses that deplete their capital. Already commented which ones.
And about the arrangements, all forms part of a SEPARATE ACCOUNT like the FHLBanks in their 1989 bailout by Congress, with assessments sent to a separate account,



Without realizing that, the FHLBanks had to pay $300 million in interests annually (a 10% rate on a $30B obligation, applying a 0.299% spread over Treasuries. GAO report. It was precisely, Sandra Thompson, who tapped the maximum amount authorized in the law, $30B, just when she arrived at the FDIC in 1990. Not a prudent course. And DeMarco in charge of accounting at GAO, requiring in the report to expel the independent accountant PwC, in order to save recourses. We later knew why: they were just reducing the 40-year interest payments from Funding Corp, where the FHLBanks were Equity holders, that only paid interests, without realizing that their SEPARATE ACCOUNT was for the REDUCTION OF THE PRINCIPAL of the obligation, not just those interests. Then, ST and DeMarco (GAO, UST, FHFA) needed funds to repay the principal. Thank goodness Silicon Valley Bank came across and ST happens to be the FHFA director, authorizing massive leverage in SVB with the advances -loans- from a FHLBank, disregarding the liquidity risk and with an AOCI opt-out election -unrealized losses in Equity- through FDIC regulation. They chose Held-To-Maturity portfolio instead, to evade recording their unrealized losses. Famous Trump's deregulation rhetoric, by removing the safeguards), the rest (on paper) reduces the principal of the RefCorp obligation (initially, a 40-year obligation), but with FnF, the dividend payments are restricted in a provision covered up by all the crooked litigants and the peddlers of the government theft story (the coverup of a material fact is a felony of Making False Statements.)


Therefore, with FnF, the entire assessment was used to repay the principal of the SPS obligation (obligation in respect of Capital Stock), knowing that later on, it will be assessed the true cumulative dividend on SPS the UST is entitled to: like the FHLBanks, it was established a spread over Treasuries, as set forth in the original UST backup of FnF in the Charter Act:

Taking into consideration the Treasury yield as of the end of the month preceding the purchase.

Hence, a weighted-average 1.8% cumulative dividend on SPS, considering a spread of 0.5% in each quarterly draw from the UST, and also the partial paydowns (It's netted out with the interests that the UST owes to FnF on the expected $152B cash refund)
Easy peasy. Just watch my signature image to see how it plays out, which is the image of a normal Conservatorship. So, don't tell me that it didn't happen.
On the other hand, a more complex mechanism in the bailout of the FHLBanks in 1989, unware that they were paying only the 40-year interests of Funding Corp, not reducing the $30B principal of the RefCorp obligation required in the law, that remained outstanding at the time.
Screenshot taken from the Earnings report of a FHLB:


And we have proof!
When the FHFA announced the "completion of RefCorp obligation", instead of paying down the principal of the obligation as stated in the provision SEPARATE ACCOUNT, it referred to "an obligation to pay interests on RefCorp bonds", mixing it up Funding Corp which was the one that only paid interests.
Playing with the word obligation: a security and also a noun (a requirement), like nowdays the Wall Street law firm representing the FHFA, with FnF: "Dividend obligation", like the RefCorp obligation that later was switched to an obligation to pay interests, instead of the security "obligation".
This way, the FHFA wants to make the dividend an obligation to pay dividends, when that doesn't exist in this world. A dividend is a distribution of Earnings (unavailable with Accumulated Deficit Retained Earnings accounts. Stuck at an adjusted $-216B nowadays), and also it's restricted when FnF remain undercapitalized (IN GENERAL).
Thus, the entire assessment was used to reduce the payment of the principal SPS, as per the exception to the Restriction on Capital Distributions (U.S.Code §4614(e)), under the guise of dividend payment (no actual dividend was ever paid in order to uphold the law).
Now is when Howard, a member of Berkowitz's legal team, steps in to claim in an Amicus brief filed with the Supreme Court, that the SPS are non-repayable securites (something not written anywhere), in order to curtail the reality of a Separate Account with FnF.


Finally, we can read in the explanation of the mechanism of RefCorp from a FHLB, that they weren't required to pay the assessments into a Separate Account if they report losses.

Any FHLBank with a net loss for a quarter, is not required to pay the RefCorp assessment for that quarter.

Whereas with FnF, the assessment worth "10% dividend" prompted the losses in many quarters, and subsequent draw request from UST and increase of SPS LP, with the objective to swelled the amount of SPS LP, so the dividend dollar amount was greater the next quarter, enriching the Treasury. Until they realized that, under the Separate Account, this was just a circular flow (drawing funds from the Treasury to pay down the UST's SPS) and the outcome is that they were just draining the UST's Funding Commitment. It's when they thought of the NWS dividend, that can't prompt the losses, similar to the FHLBanks' scheme.

We could have witnessed two rogue officials desparate to cover their losses with the FHLBanks (a $30B RefCorp obligation), using FnF, at the same time a Goldman Sachs alumni that just wanted the assault on the ownership of FnF with the Warrant "Clause 2.1: Shares assigned to any Person", and all of them made some politicians think that they had nationalized FnF to appease them, but, at the same time they made sure that they upheld the law with a Separate Account (July 20, 2011 Final Rule for the CFR 1237.12, better known as "The supplemental". A follow-on plan), authorized in the FHFA-C's Incidental Power ("any action authorized by this section,...".

To put just one example, senator Brown stating in a hearing a few years ago, that the conservatorships were being very profitable for the taxpayers. Now, he doesn't even mention the word "Conservatorship" when he realized that there is a Separate Account plan in accordance with the law, as we saw in last week's Senate hearing.
Once the dust settles, the taxpayer will net $0 in the bailout of FnF, as per the Charter Act.

Other theme is the multiple windfalls (10bps g-fee sent to UST as TCCA fee; a one-time 4.2 bps allocated to HUD/UST; the MHA program,...) and the possibility of a profit with the acquisition of our stocks at their fair value (BVPS) and resale at another fair value with a different stock valuation (for instance, a PER 10x and 12x).
The redemption of JPS at their fair value of par value, boosts the PER valuation (The EPS or Earnings for the PER, is calculated after the dividends on Preferred Stocks). It's a corporate decision and it has nothing to do with the ownership of FnF (they are obligations in respect of Capital Stock that can stay in the capital structure with a restated dividend. Though costly and unnecessary with an excess of capital: CET1 >2.5% of ATA)