Replies to post #728105 on Fannie Mae-No Politics (FNMA)

[kthomp19]

From FHFA directly in 2008, Lockhart.. see the last paragraph

Apples and oranges.

The post I responded to multiplied the $95B number you quoted by 79.9%. Since the 79.9% number is the amount of total common equity Treasury will receive upon exercising the warrants, the equation in the previous post directly implies that FnF's equity attributable to common shares was $95B. I proved that false by showing their actual balance sheets from June 30 2008.

Lockhart said FnF had $95B in "total capital", but that number includes things other than common equity. HERA, 12 USC 4502(23), defines total capital as:

(23) Total capital
The term “total capital” means, with respect to an enterprise, the sum of the following:
(A) The core capital of the enterprise;?[1]
(B) A general allowance for foreclosure losses, which—
(i) shall include an allowance for portfolio mortgage losses, an allowance for nonreimbursable foreclosure costs on government claims, and an allowance for liabilities reflected on the balance sheet for the enterprise for estimated foreclosure losses on mortgage-backed securities; and
(ii) shall not include any reserves of the enterprise made or held against specific assets.
(C) Any other amounts from sources of funds available to absorb losses incurred by the enterprise, that the Director by regulation determines are appropriate to include in determining total capital.

Page 125 of the pdf of Fannie's Q2 2008 10-Q form says their total capital as of June 30 2008 was $55.568B. Freddie's Q2 2008 10-Q has "N/A" next to "Total capital" on page 151 of the pdf, but it was $40.929B on December 31 2007 (the last date OHFEO made a determination), so that combined with Fannie's makes around $95B.

It rounds to $96B, but Freddie's core capital dropped around $0.7B between December 31 2007 and June 30 2008, so if their total capital dropped by the same amount in that time then $95B combined makes sense.

It's clear that the $95B number includes things other than equity attributable to common shareholders, which is the only thing Treasury can be accused of having "stolen" (or FHFA of having "given away") via the issuance of the warrants.

Short version: nice try.