Replies to post #770419 on Fannie Mae-No Politics (FNMA)

[FOFreddie]

Hi No Name - Rodney is taking the same position as the CBO - you will probably say that we should trust a poster with No Name and no position in the GSEs rather than the CBO? We are on the CBO 5 year plan - this is the excerpt from the CBO Restructuring Paper:

https://www.cbo.gov/publication/56511

CBO’s Analysis of Options to Recapitalize the GSEs

CBO examined two hypothetical options for recapitalizing Fannie Mae and Freddie Mac through administrative actions by FHFA and the Treasury rather than through legislation. Under the options, the GSEs would keep all of their profits for an initial period—either three or five years—to build up capital. After that, they would try to raise enough funds to complete their recapitalization by selling common stock to investors. The GSEs would use any proceeds left over from the common-stock sale to repurchase (redeem) previously issued senior preferred shares held by the Treasury and junior preferred shares held by investors.4

CBO’s analysis focuses on key outcomes of recapitalization, including the following:

The effects on cash flows to the Treasury from eliminating or redeeming some or all of its liquidation preference in the GSEs (the amount of money the Treasury is eligible to receive before more junior investors are paid);

The size of the payments to and from investors as a part of recapitalization; and

The legal and financial considerations of recapitalizing the GSEs through the sale of new common stock during conservatorship or through other approaches, such as receivership. (In receivership, FHFA or a designated agent would restructure the GSEs by liquidating some or all of their assets or transferring those assets to other entities, including the Treasury and existing shareholders.)

To analyze the options, CBO had to make projections about various factors related to recapitalization, such as FHFA’s final capital requirements for the GSEs, the growth rate of their earnings, and how potential shareholders would estimate the value of the GSEs. In its analysis, CBO created multiple scenarios using different combinations of estimates for those factors.

So - No Name do you think we should trust you or the CBO and TH?

[Wise Man]

You learn first what a dividend is.
1st. Restricted when undercapitalized (to build capital obviously)
2nd. Unavailable funds for distribution, out of a Retained Earnings account (Equity) with Accumulated Deficit all along.
3rd. A breach of the conservator's Rehab power.
4th. In this world, mandatory dividend doesn't exist (FHFA's attorney), otherwise it'd be interests payments (expense). Then, it'd be a different security.

Therefore, what FnF sent to UST can't be called dividend because it can't be an actual dividend.
It was a capital distribution under the guise of dividend payment, that is applied towards the exceptions to the Restriction on Capital Distributions in the FHEFFSA (reduction of SPS), then the CFR1237.12 (Recapitalization)
The conservator's Incidental Power allows it to mislead (take any action...) if the endgame is the rehabilitation of FnF (...authorized by this section)
The goal is to legalize this action that shouldn't have existed.
Who in their right mind would pay dividends during a Conservatorship for Critically Undercapitalized enterprises, first 10%, then a NWS dividend? Someone carrying out a Separate Account plan, similar to the one in the 1989 scheme with the FHLBanks and with the same officials (DeMarco, Sandra Thompson)

Learn what a dividend is.

, says Bradford.