Monday, February 10, 2014 3:31:29 PM
Credit for this goes to bryndon.fisher over at the google boards. This excerpt comes from the latest court case: Continental Western Insurance Co. vs. FHFA, Watt, US Treasury:
https://groups.google.com/forum/#!topic/freddienfannie/ivIgTSFGR08
80. Statements by both FHFA and Treasury provide further confirmation that the Net Worth Sweep violates FHFA’s statutory restrictions as conservator. Treasury, for example, said the Net Worth Sweep would “expedite the wind down of Fannie Mae and Freddie Mac,” and it emphasized that the “quarterly sweep of every dollar of profit that each firm earns going forward” would make “sure that every dollar of earnings that Fannie Mae and Freddie Mac generate will be used to benefit taxpayers.” Press Release, U.S. Dep’t of the Treasury, Treasury Department Announces Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac (Aug. 17, 2012). Indeed, Treasury emphasized that the Net Worth Sweep would ensure that the Companies “will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.” Id. As early as December 2010, internal Treasury documents acknowledged the “Administration’s commitment to ensure existing common equity holders will not have access to any positive earnings from the [Companies] in the future.” Action Memorandum for Secretary Geithner (Dec. 20, 2010). The Net Worth Sweep thus implemented this internal Administration decision.
The cited source is a discovery document obtained by the Plaintiff's legal team from the Treasury. It provides direct evidence that 2 years prior to the 3rd PSPA amendment, an internal memo sent by Timothy Geithner (Sec. of Treasury at the time) mandated that common shareholders would see no benefit from any profits generated by the GSEs. This is highly ethically and legally inappropriate and goes against the very essence of free-market trading.
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