Fannie Mae-No Politics (FNMA)

[obiterdictum]

1. No problem.

2. That is what was done in the Capital Purchase Program (CPP) without issue by the US Treasury for over 700 companies many of them federally chartered. One payment in full was accepted for the entire investment, usually after dividends of 5% per annum were paid for a specific period of time.

Under Waters' bill, theoretically, PSPAs can be amended to do this.

See bottom part of this post for links to the CPP and companies that participated. http://investorshub.advfn.com/boards/read_msg.aspx?message_id=99690421

Take a look at the hundreds of examples where this was done. Why exclude the GSEs from this arrangement where the GSEs are charged a 10% dividend and/or a net worth sweep in perpetuity against an unredeemable preferred stock with warrants for 79.9 % common stock?

3. We are not on the same page about the "repayment" as far as reality goes when considering what actually happens before the enactment of the bill and then afterwards. That is a repayment model and and is understandable as a method to retroactively reconcile. As a model, however, it leads to a 40% or more return on the US Treasury investment and so I could not agree to its use for GSE shareholders. It is giving money away based on math alone.

4. As you know, Treasury does not make law. Congress does that and the Judicial system can interpret and change laws. The President as head of the Executive Branch Administration may or may not resist by not signing such a law because Treasury people are not happy.

5. Questions: Under this bill, what would the amortization schedule, interest and principal, look like over 30 years for 189.4 billion dollars as principal? What would the total amount in interest payments be?

Bill link and text is below.

Let the GSEs Pay Us Back Act of 2013
https://www.govtrack.us/congress/bills/113/hr2435/text

113th CONGRESS
1st Session
H. R. 2435

IN THE HOUSE OF REPRESENTATIVES

June 19, 2013
Mr. Capuano introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To provide for the repayment of amounts borrowed by Fannie Mae and Freddie Mac from the Treasury of the United States, together with interest, over a 30-year period, and for other purposes.

1. Short title
This Act may be cited as the Let the GSEs Pay Us Back Act of 2013 .

2. Repayment of Treasury borrowing
The Secretary of the Treasury and each enterprise (acting through the conservator for the enterprise appointed pursuant to section 1367 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4617 )) shall enter into an agreement with that modifies the Preferred Stock Purchase Agreement for such enterprise to provide as follows:

(1) Termination of dividends
That after such modification, any Senior Preferred Stock purchased under such Agreement by the Department of the Treasury shall not accrue further dividends.

(2) Treatment of enterprise draws on Treasury
That any amounts received, before or after such modification, during a single year by the enterprise as a draw on the commitment made by the Department of the Treasury under such an Agreement, shall be treated as a loan made by the Treasury to the enterprise that—

(A) was originated on the date of the last such draw during such year;
(B) has an original principal obligation in an amount equal to the aggregate amount of such draws;
(C) has a term to maturity of 30 years;
(D) has an annual interest rate of 5 percent for the entire term of the loan;
(E) has terms that provide for full amortization of the loan over such term to maturity; and
(F) shall be repaid by the enterprise in accordance with the amortization schedule established for the loan pursuant to subparagraph (E) of this paragraph, subject to paragraph (3).
(3) Treatment of dividends paid
That any dividends paid by the enterprise to the Department of the Treasury under the Senior Preferred Stock Agreement before such modification of such Agreement shall be treated as payments of principal and interest due under the loan referred to in paragraph (2), and shall be credited against payments due under the terms of such loan (in accordance with the amortization schedule established for such loan pursuant to paragraph (2)(E)), first to such loan have the earliest origination date that has not yet been fully repaid until such loan is repaid, and then to the next such loan having the next earliest origination date until such loan is repaid.

3. Definitions
For purposes of this Act, the following definitions shall apply:

(1) Enterprise
The term enterprise has the meaning given such term in section 1303 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( 12 U.S.C. 4502 ).

(2) Preferred stock purchase agreement
The term Preferred Stock Purchase Agreement means, with respect to an enterprise, the Amended and Restated Senior Preferred Stock Purchase Agreements, dated September 26, 2008, amended May 6, 2009, further amended December 24, 2009, and further amended December 24, 2009 (as such agreements may be further amended), between the United States Department of the Treasury and such enterprise.