Fannie Mae-No Politics (FNMA)

[obiterdictum]

There is no liability towards the government such as a loan or note payable. There is no subsidy. That is made clear on the GSEs financial statements.

There are "investments" made and "dividends" paid on the "investments" as part of the GSEs stockholder's equity on the balance sheet, dividends paid as adjustments to net income on the income statement and cash payments and proceeds made and received in the financing activities on the statement of cash flows.

However, this arrangement is a only a superficial cover that allows the GSEs to draw money without the US Government having to put GSE business and financial matters and records on the government's books. The senior preferred share agreement is a financial mechanism that was made to allow the GSEs to draw from the US Treasury and to return dividends to the US Treasury as directed by the US Treasury and FHFA. It has been circular route of taking out money and giving money back.

The US Treasury acts like an "investor" in a company and buys the company's senior preferred stock with an agreement to receive quarterly dividends. In actuality the US Treasury and FHFA as a unit have almost unlimited control over the GSEs in the conservatorship and so they determine all stock agreement terms, determine their business policy, direction and operations, sweep their profits, reduce their business footprint and internal operations and hold them hostage while they do a very, very profitable business.

Yes. There is actually no way for the GSEs to end this arrangement. It is entirely in the hands of the US Treasury and is not normal business or financial transactions. After all, who is dictating all of the terms of the agreements and amendments and enforcing regulations and compliance with the terms?

Yes. By January 1, 2018, the US Treasury is entitled by the agreements and amendments to those agreements to take the entire net worth of the GSEs, if any, after the capital reserve amount of 3 billion is reduced gradually by $600 million per year for five years from January 2013 to December 31, 2017.

Take a stab at it. Is that the value exactly?

The formula is correct.