Replies to post #773595 on Fannie Mae-No Politics (FNMA)

[Rodney5]

Let's explain it again to our friend Donotunerstand.

The Treasury has confiscated over $301 billion from Fannie and Fredde!

It’s bad faith and unfair dealing when the Regulator is authorized to pay down the Senior Preferred Stock and sent the Net Worth without the pay down option. The FHFA Director doesn’t need the Treasury approval to pay down the Senior Preferred Stock the Director has the authority from Congress written in HERA:

HOUSING AND ECONOMIC RECOVERY ACT OF 2008

RESTRICTION ON CAPITAL DISTRIBUTIONS.— page 2731
‘‘(1) IN GENERAL.—A regulated entity shall make no capital distribution if, after making the distribution, the regulated entity would be undercapitalized. The exception.

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.

Link: https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf

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. The Treasury did not take a Perpetual Equity Investment in the enterprises, the Treasury stated a temporary investment period!

The calculation of the pay down of the liquidation preference of the Senior Preferred Stock.

https://drive.google.com/file/d/15978NWfDcTtuClMBnwgWFmoPnwK94vWn/view

The liquidation preference has been paid and the Senior Preferred Stock should be canceled.

[Donotunderstand]

?
I read your first - earlier - post as FHFA paying down that obligation TO Treasury

The question was NOT where does Treasury get money --- but how does FHFA (F and F) buy back the SP (at current LP level) from Treasury

Are we talking past each other ?

My impression is SP/LP is about 200B and yes 300B went to Treasury. That is why I say Treasury can change its definitions a bit and say its entire investment is paid off - done - zero - written off

Again - I thought ? you were saying FHFA/F/F would buy back that huge SP/LP "amount" ?

Did that make sense to you now? (Treasury can call it square tomorrow - but FHFA-F-F can not afford to buy back the Senior Equity Paper IMO)