Replies to post #766061 on Fannie Mae-No Politics (FNMA)

[Guido2]

Corporations have to recognize debts of other entities in which they own more than a 50% stake. Don't know why the accounting standards would be different for the government.

[Rodney5]

Barron Quote: “What I am saying is that if it is found that the actions of Treasury since 2008 would require that the GSEs be consolidated on the nations balance sheets as required by FASAB, then that would be an actual takings requiring Treasury to also include the mbs liability (trillions) on the nations balance sheet. The result would be that the Treasury’s actions recreated FNMA as an agency of the united states as they were created in 1938. This was not intended by Congress when they amended the charter act under HERA. So this is a major question doctrine case, a constitutional debt clause case, a takings case, and a major questions case. Treasury was told to buy GSE stuff in 2008-2009 to help them out. Not take them over and nationalize them violating all the accounting and budgeting laws of the United States.” End of Quote

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https://files.fasab.gov/pdffiles/2022_%20FASAB_%20Handbook.pdf

[Rodney5]

Absolutely!

Charter Act SEC. 304. SECONDARY MARKET OPERATIONS
(c) Terms and Rates

Quote: “All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this subsection SHALL BE TREATED AS PUBLIC DEBT TRANSACTIONS of the United States.” End of Quote Page 14

The CFO act requires the Treasury department based on published accounting standards to determine if their actions of funding through appropriations, ownership of 100% of the GSEs net worth and non-regulatory control of the GSEs through the SPSPA require the consolidation of the GSEs liabilities onto the nations balance sheet. Do the actions of Treasury under the SPSPA require such consolidation under the plain language of the Chief Financial Officers Act?


The Congressional Budget Office publication states, “Federal Government effective ownership of Fannie Mae and Freddie Mac.”

The Enterprises have been Nationalized by the Government according to the CBO: The liabilities have not been added to the National Debt nor have the Shareholders been compensated by U.S. Law of the 5th Amendment.

Congressional Budget Office
From: Estimates of the Cost of Federal Credit Programs in 2023

Page 1, Foot Note 1.

Quote: “Fannie Mae and Freddie Mac have been in federal conservatorship since September 2008. CBO treats the two GSEs as government entities in its budget estimates because, under the terms of the conservatorships, the federal government retains operational control and effective ownership of Fannie Mae and Freddie Mac. For more discussion, see Congressional Budget Office, Effects of Recapitalizing Fannie Mae and Freddie Mac Through Administrative Actions (August 2020), www.cbo.gov/publication/56496; and Congressional Budget Office, The Effects of Increasing Fannie Mae’s and Freddie Mac’s Capital (October 2016), www.cbo.gov/ publication/52089” End of Quote

Link: https://www.cbo.gov/system/files/2022-06/58031-Federal-Credit-Programs.pdf

The United States Treasury in violation of the Charter Act has failed to treat as public debt the transactions of the United States when the FHFA placed Fannie Mae and Freddie Mac into conservatorship. This obligation was never recorded as public debt as required by law.

The Charter Act the Law of the Land.

Charter Act SEC. 304. SECONDARY MARKET OPERATIONS
(c) Terms and Rates

Quote: “All redemptions, purchases, and sales by the Secretary of the Treasury of such obligations under this subsection SHALL BE TREATED AS PUBLIC DEBT TRANSACTIONS of the United States.” End of Quote Page 14

Link: https://www.fanniemae.com/sites/g/files/koqyhd191/files/migrated-files/resources/file/aboutus/pdf/fm-amended-charter.pdf

[philipmax]

You got it! At 80% the corporate debt of F&F will have to be added to our National Debt. F&F debt is much more than $7T, more like $20T.
Going back to the Nixon era's National debt 'crisis'. The 'crisis' was mainly due to our bourgeoning increase in oil imports, and our war in Vietnam that created a massive increase in the debt. The solution, in 1973, was to do an IPO for Fannie and remove, at the time, $5B from our National debt. A well subscribed New Issue was able to raise a huge sum for the Treasury as well as to remove Fannie Mae's debt from the National debt. This act served to subdue the 'debt crisis' raucous filling the press at the time (imagine, the outrage today at @ $33T). From 1973 onward, Fannie Mae, and later Freddie Mac, were publicly held companies just like GM and IBM. They had a BOD, an annual meeting, and an outside auditor etc...

I was young at the time and did not give much thought to the press's reasons for the debt hysteria. In retrospect, and armed with 'fake news' awareness, it is now obvious to me, that there was a well orchestrated Wall Street agenda to profit from the projected IPO income and the press was recruited to propagate the 'crisis'..

Well, now, these companies were well intrenched as PUBLICLY HELD COMPANIES, entitled to the same constitutional shareholder protection as any other publicly held company. Government interference in the operation of these companies is a gross violation of Law. No Federal agency has any right to confiscate these companies. especially, when they were fully solvent and operating for the public good. I can't see any justification for the Treasury or FHA to intervene. Yes, there was a financial emergency, the government had to correct it.
Good! I get it! Why not just issue $Billions of Treasury debt to fix the problem that our congress was largely and integrally responsible for. A private entity could not, and should not, shoulder the entire solution to the crisis on the back of its shareholders. There was plenty of shenanigans' going around in the financial community in 2005-2008, why did the 'wise' Treasury officials not attended to those misdeeds at the time. To blame F&F for the crisis is simply scapegoating the victim This whole SAGE sickens me!

[Rodney5]

Vancmike, the amount own greater than 50%

Barron Quote: “Whether or not they explicitly guarantee doesnt determine if they can avoid putting the liabilities on the nations balance sheet. The Treasury used appropriations to provide a $200 billion commitment, own greater than 50% of the GSEs, and asserted non regulatory control of the GSEs through the SPSPAs. These are the 3 conditions listed under FSAB for consolidation. Only one of which is necessary to require Treasury to consolidate. Treasury has met all 3 since 2008, and has chosen to break federal law thereby resulting in the Treasury unconstitutionally repudiating the nations debt. Those 3 criteria show a complete nationalizing of the GSEs. The fact the shares still trade is a giant securities fraud” End of Quote

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[jeddiemack]

Problem is... from an accounting GAAP perspective, since the government controls the entities and have a large effective ownership thru in the money warrants, they should already be including them in the national debt. Which really isnt that much of a big deal now... 5-6 trillion onto 34 trillion is a pittance. It was significant back 20 years or so ago when it was just 13 trillion... so

theres that.

But does the sec reporting people care...

apparently not.

no one that matters seems to give a toot.

[kthomp19]

Questions - Is there a rule or policy that if the government owns more than 80% of FnF they have to put the debt of FnF on the US national debt?

Wasn't this the reason the government owns 79.9%

Wouldn't this add $7 trillion to the national debt? And a potential downgrade?

Is this the hurdle for any conversion?

All of these are misconceptions.

Here's the bottom line: Treasury would not have to consolidate FnF's balance sheets onto the government's no matter how large a percentage of FnF's common shares they own during conservatorship.

During conservatorship SFFAS No. 47, part 42 would apply (page 15):

42. Entities for which the relationship with the federal government is not expected to be permanent, such as receiverships, conservatorships, and other intervention actions, would be less likely to meet these characteristics as a whole. Such entities generally would not be classified as consolidation entities.

When Treasury converted its AIG preferred shares to 92% of the common stake, they didn't consolidate AIG's balance sheets onto the government's. They agreed to vote their stake in proportion to non-Treasury common shareholders which effectively eliminated Treasury's voting power (and thus control). That lack of control would allow them to justify not consolidating FnF's balance sheets onto the government's after release from conservatorship.