Wise Man said Quote: “The law isn't HERA but the FHEFSSA-Charter Act, as amended by HERA.” End of Quote
That statement is not completely correct. Yes, FHEFSSA, Charter Act the law and HERA amended both, READ PAGE 1
HERA PUBLIC LAW
PUBLIC LAW 110–289—JULY 30, 2008 HOUSING AND ECONOMIC RECOVERY ACT 2008
Wise Man Quote: “The 10% and NWS dividends existed and they are forbidden,“ End of Quote
You are exactly right. NO CAPITAL DISTRIBUTION IS ALLOWED WHILE THE ENTERPRISES ARE UNDER CAPITALIZED
The SCOTUS upholding the NWS does not change the fact the LP can be paid down and the SPS redeemed under the terms of the LAW OF HERA. The money kept by the Treasury by the NWS should be applied to principle and 10% interest and over payment should be returned to the companies. $301 billion is more than enough to pay the LP and redeem the SPS. Secondary IPO replaces the commitment.
This is the argument of the Cram Down People, they reference the
The Senior Preferred Stock Purchase Agreement Optional Pay Down of Liquidation Preference Following termination of the Commitment.
Quote: “The companies can't terminate the commitment anyway no matter what without Treasury's approval. The funding commitment doesn't have anything to do with the NWS. The funding commitment came into existence when the original SPSPAs were signed in 2008.” End of Quote. WRONG!
The Senior Preferred Stock Purchase Agreement is an illegal contract.
The LAW
HOUSING AND ECONOMIC RECOVERY ACT OF 2008
Quote: “Page 2732
EXCEPTION.—Notwithstanding paragraph (1), the Director may permit a regulated entity, to the extent appropriate or applicable, to repurchase, redeem, retire, or otherwise acquire shares or ownership interests if the repurchase, redemption, retirement, or other acquisition— ‘‘(A) is made in connection with the issuance of additional shares or obligations of the regulated entity in at least an equivalent amount; and ‘‘(B) will reduce the financial obligations of the regulated entity or otherwise improve the financial condition of the entity.’’.
NOTE: REPURCHASE, REDEEM, RETIRE...
WILL REDUCE THE FINANCIAL OBLIGATIONS OF THE REGULATED ENTITY.
In essence allows the trustees of Fannie and Freddie to go to the market at any time to raise new capital, including new capital with lower dividend coupons, to buy back the Treasury’s senior preferred. Any loyal conservator of Fannie and Freddie would take advantage of this refinancing option to end the bailout arrangement, by paying off the senior preferred in full.
1237.12 Capital distributions while in conservatorship.
(a) Except as provided in paragraph (b) of this section, a regulated entity shall make no capital distribution while in conservatorship.
(b) The Director may authorize, or may delegate the authority to authorize, a capital distribution that would otherwise be prohibited by paragraph (a) of this section if he or she determines that such capital distribution:
No 1: Will enhance the ability of the regulated entity to meet the risk-based capital level and the minimum capital level for the regulated entity;
No 2: Will contribute to the long-term financial safety and soundness of the regulated entity;
No 3: Is otherwise in the interest of the regulated entity; or
No 4: Is otherwise in the public interest.
Section c, this section is intended to supplement and shall not replace or affect any other restriction on capital distributions imposed by statute or regulation.
DID THE NET WORTH SWEEP
Enhance the ability to meet risk-based capital level? NO
Contribute to the long-term financial safety and soundness of the regulated entity? NO
In the interest of the regulated entity? NO
Is otherwise in the public interest? NO (The taxpayers are responsible for the liabilities of the enterprises).
The Net Worth Sweep could not possibly have any rehabilitative effect and that one of the principal duties of the FHFA Director is to preserve and conserve assets.
Fannie is allowed to retain its earnings until it fully meets its applicable risk-based capital requirement (it’s currently short by $247.8 billion), but those increased retained earnings are matched by a dollar-for-dollar increase in Treasury’s liquidation preference.
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