Fannie Mae-No Politics (FNMA)

[Wise Man]

16 years into a Conservatorship for the rehabilitation, you talk about a "distressed" scenario.
What happens is that you are annoyed with your JPS. An AT1 Capital instrument that "MUST HAVE DIVIDEND DISCRETION" (Definition), to meet the criterion for inclusion, meant for the recapitalization of enterprises.

This is a longstanding rule that anyone in the financial markets knows about.
Have a look to the prospectus of the 5.5% Non-Cumulative dividend Preferred Stock issued by Goldman Sachs: Dividend suspended for its recapitalization.


The utilization of the U.S. courts by the hedge funds to change the financial concepts has been the bread and butter during conservatorship.
Like judge Lamberth in the current case pending:

No genuine dispute remains on the fact of harm on the theory of plaintiffs were denied dividends that they otherwise were reasonably certain to receive. Source.

Everyone wants dividends, when there is a Restriction on Capital Distributions. Exceptions.

You thought that there is nothing wrong with the fixed-income security behind a Preferred Stock, when it's recorded in Core Capital in the FHEFSSA.

And with regard to the outstanding dividend rate in comparison to the interest rate on similar obligations by the same issuer, it's because you were outsmarting them, and not because there are risks attached related to Capital Adequacy.

Playing the fool, like the attorney for Fairholme, David Thompson, in a Conference Call hosted by Pagliara:

With respect to capitalization, I am not a regulatory lawyer. I am a litigator.
That's being watched by a number of sophisticated lawyers...

Better known as the 💩🩲 legal defense strategy in the case that someone calls him out for his misbehavior in court, by not challenging even $1 of Core Capital out of the $402B core capital shortfall over minimum Leverage capital ratio during conservatorship, and instead, he's been instructing the judges about what they have to say.

Guess what. Justice Alito said "rehabilitate FnF" (FHFA-C's Rehab power: Put FnF in a sound and solvent condition) and that's enough for me. Add that it can be done in the way that the FHFA wants (in its best interests), provided that it has only one financial meaning: build regulatory capital (Retained Earnings account: CET1) to cover the future unexpected losses (Basel definition of capital).

All comes down to JPS holders that rather see their dividend sent to the Treasury, instead of being kept by the enterprises for their rehabilitation (recapitalization) and this is why we see them colluding with the government with "dividend obligation" on SPS, in order to mimic the "interest-only" feature of the REFCorp bonds in the failed 1989 bailout of the FHLBanks, instead of cumulative dividend on SPS. Etc.