Replies to post #303678 on Fannie Mae-No Politics (FNMA)

[obiterdictum]

Good Day cfljmljfl,

My understanding through experience is either party may terminate a Charter and end the relationship that brings to the parties. However, termination of the Charter does not terminate the life if either party. Is it correct to say the GSEs could terminate the Charter and continue a life as an entity?

The GSE charters can only be terminated by an Act of Congress.

See: Search the documents for "dissolve" Cntrl F (PC) Command F (Mac)
http://www.fanniemae.com/resources/file/aboutus/pdf/fm-amended-charter.pdf
http://www.freddiemac.com/governance/pdf/charter.pdf

The corporate form of the GSEs after a termination of the Charter is partially determined by Congress and shareholders. For an example of a GSE going private review Sallie Mae's privatization.

See:
http://www.treasury.gov/about/organizational-structure/offices/Documents/SallieMaePrivatizationReport.pdf
http://fic.wharton.upenn.edu/fic/papers/05/0534.pdf

Is it correct to say that terminating the Charter would no longer force the GSEs to comply with the mission restrictions of the Charter?

Yes. The charters have mission mandates and restrictions and with the end of the charters so these would end as well depending on the corporate status taken.

Bottom line is could GSEs survive as private entity without government Charter?

Yes.

[Sogo]

Interesting questions cfljmljfl. Over the last few years we've heard rumors of what congress might do, and sometimes it sounds like some congressmen are interested in revoking the GSEs' charters. To us GSE longs that always sounds bad.

But now I am imagining that if congress revoked the charters, then the GSEs would be free to expand their services and operations. It's interesting to think of what they might decide to do or would be capable of doing without the charters' restrictions. So I no longer fear revocation of the charters, per se. But of course we'd still need to be released and recapitalized before I stop worrying!