Fannie Mae-No Politics (FNMA)

[obiterdictum]

Excellent, precise table work data compiled from primary sources. That took considerable effort and is much better than the rounded figures I have used. Thank you for your hard work compiling that data. I will use this from now on.

The method applied is clear. Pay the 10% owed as contracted and all excess paid in above the annualized 10% per quarter goes to pay down the liquidation preference. Then pay 10% on the gradually reduced LP remainder till the LP is resolved.

This model calculation, however, comes at a hefty price to the GSEs and shareholders.

If adopted, it will exact a usurious amount of payments from the GSEs and would be completely unlike the TARP arrangements where the greatest return has been paid by Citigroup at $13,448,572,616 in profits to the US Treasury in exchange for 45 billion in TARP and other funds. That is a 30 percent return and is clearly the odd case among the bailed out companies were far far less in profitable returns have been received by the US Treasury.

See: http://projects.propublica.org/bailout/list/simple

If the model plays through to a complete reduction of the LP over a number of years without the sweep in place, the returns to the Treasury for the investment will be over 40%. Also consider that the warrants would still be valid.

A fair and equitable exchange would be a flat 10% dividend on the LP total ($18.94 billion) and redemption of the Senior Preferred for Fannie and Freddie for $189.4 billion.

This could be paid in by the second quarter of 2014 for a total of $208.34 billion for both GSEs. 203 billion will be paid in by March 31. 2014.

What do you think?