Fannie/Freddie Politics Board (Politics Allowed~Non-Moderated)

[955]

Warrants will NOT be exercised. The purpose of the warrants was and is to keep pps suppressed. IPO/SPO not needed and is unnecessary.

Final Meeting Minutes on October 22-23, 2008
48
Mr. Werfel explained that the control elements of a conservatorhsip are intended to put the institution back on its feet—not to liquidate it. The conservatorship would be terminated when the institution is on sound footing. However, the financial transaction—the exchange of preferred stock and warrants for the guarantee—complicate matters.

Mr. Allen indicated that there does not appear to be a separation between the GSEs and the government. The actions taken imply that the pattern could repeat itself – conservatorship could repeat in the future.

Mr. Werfel indicated that the intent at this time is that the control is intended to be temporary and the FASAB, FASB and GASB literature provide that temporary control should not lead to consolidation. The intent of Treasury is not to exercise the warrants that provide 79.9% ownership. The purpose of the warrants was to drive the stock price down to next to nothing. When the government steps in to aid a publicly traded entity it does not invite fair trading. The Treasury wished to freeze the market for this stock and the warrant accomplished that goal. They have no voting interest and only own an option to own the entities.

Mr. Farrell noted that the government seems to have absolute control of the GSEs even if the intent is temporary. He explained that the FASB literature regarding temporary control is designed to deal with a stepped transaction where you end up with control for a brief period. He does not read the reports of the GSE activity to be temporary. Mr. Werfel noted that these arrangements lead to a very dynamic situation. There are steps in the future that would need to be taken to indicate that the intent is to permanently control the entities. The intent of Treasury has been clear that this is a temporary arrangement. If that changes, then the consolidation decision would be evaluated.

Mr. Steinberg said that with these GSEs having an implied guarantee for many years he wonders whether it is realistic to expect the GSEs to return to their former status. Mr. Torregrosa indicated that CBO saw the relationship differently. The government has effective control. CBO agrees that receivership and conservatorship are different. The GSEs are being used to attain public goals. Therefore, CBO believes they should be on budget.

Mr. Allen indicated that FASAB can not affect the FY2008 reporting through new guidance. However, during the course of the year FASAB should review what was done and consider new guidance.

https://files.fasab.gov/pdffiles/oct08mins.pdf

GSE's were never placed on budget. Warrants were never exercised. Exercising warrants is a "take control" action. In order to take full control, GSE's, which are being used to attain public goals, must be placed on budget according to CBO. GSE's were never placed on budget. There is absolutely no justification to take control now. F&F are stronger than ever. WARRANTS WILL NOT BE EXERCISED! ...and you can take that to the bank.