Fannie Mae-No Politics (FNMA)

[SSDBase]

Yes, the US Treasury gets all profits now. None is available for private shareholders (including common stock). I watched the hearing live and that was his verbal response to a direct question.

That is not what he said. Any dividends do not count towards paying off the debt. That does not mean that any profit that they make after the dividends cannot go towards paying off the debt.

Through 2012 they paid a fixed 10% annual dividend. Even if they didn't make any money, the Treasury would loan them money to pay dividends to the Treasury. Starting in 2013 all positive net worth above a reserve amount will be sent to the Treasury as a dividend and does not reduce the Treasury's holdings or liquidation preference. So all profits go to the US Treasury. FNMA/FMCC are not allow to retain any earning. Nothing is available for common or non-government preferred shareholders.

From their last 10Q under "Amendment to Preferred Stock Purchase Agreement with Treasury:"

For each dividend period from January 1, 2013 through and including December 31, 2017, the dividend amount will be the amount, if any, by which our net worth as of the end of the immediately preceding fiscal quarter exceeds an applicable capital reserve amount. The capital reserve amount will be $3.0 billion during 2013 and will be reduced by $600 million each year until it reaches zero on January 1, 2018. For each dividend period beginning in 2018, the dividend amount will be the entire amount of our net worth, if any, as of the end of the immediately preceding fiscal quarter.

As a result of these revised dividend payment provisions, beginning in 2013, when we have quarterly earnings that result in a net worth greater than the applicable capital reserve amount, we will pay dividends to Treasury in the next quarter; but if our net worth does not exceed the applicable capital reserve amount as of the end of a quarter, then we will not be required to accrue or pay any dividends in the next quarter.

And if that wasn't clear enough, they put it in Risk Factors as well:

Accordingly, our dividend obligations beginning in 2013 will result in our retaining a limited and decreasing amount of our earnings each year until 2018. Beginning in 2018, we will no longer retain any of our earnings, as the entire amount of our net worth will be paid to Treasury as dividends on the senior preferred stock.

Entire amount of Net Worth paid to Treasury means FNMA net worth will be 0. Common shareholders will have a share in a company with a net worth of 0 that must pay over $100 bil to the Treasury before common shareholderss get anything.