Replies to post #776832 on Fannie Mae-No Politics (FNMA)

[HappyAlways]

NWS is deemed a breached contract, it will be revoked in coming lawsuits. It is just a matter of time, IMO.

Keep fighting, NWS is unconstitutional.

[Donotunderstand]

ok
sure seems right
but
if you have that SPS terms document

might there be a paragraph - near bye - ? that speaks to the ability to pay in shares of stock

my memory is weak and its 15 years but damn it - I do remember such clause

it might say - the above not withstanding - the company can choose to make payment in shares of stock ....

I do not think I invented it -- but I do agree that lack of payment goes to LP and I agree 200% that the NWS was never killed and that such bragging for the last administration is all smoke and mirrors as the LP keeps going up dollar for dollar big time

[Wise Man]

The dividend to Treasury was eliminated to all effects.
You are posting a covenant in the SPSPA stating that when there is no cash dividend, the SPS LP is increased. But this isn't the case.
First of all you should haven known that this scheme was enacted in the September 21, 2019 5th amendment of the PA ("Letter Agreement"), exactly three weeks after judge Willett ruled in the 5th Circuit court, regarding the Collins case, that the conservator exceeded its powers with the NWS dividend and thus, it compelled the FHFA and the UST to make a move.
Calabria and Mnuchin came up with what already was put in place in a prior amendment with Mel Watt, when $3 billion worth of SPS LP was handed out for free on December 31, 2017, which is missing in the Balance Sheets.
This is why they approved a brand new compensation to Treasury, set forth in a brand new covenant in the SPSPA (image posted below) that appears below the covenant that you mention and thus, it doesn't apply because it isn't a dividend.

This new compensation consists in increasing the SPS LP in the same amount as the Net Worth increase in the quarter. They later will peddle the lie of "FnF build capital" to pass it off as the "game changer" required by judge Willett implicitly when the conservator was called out.
But this slogan is a big lie when the outcome of this operation is that FnF are NOT building the regulatory capital that has to meet the capital requirements (ERCF), but capital stock SPS. In order to conceal this outcome, they simply chose to don't post these gifted SPS in the Balance Sheet, in order to not see the effect when a company issues/increases capital stock for free (without receiving the corresponding cash), which carries an offset with reduction of core capital, either Addition Paid-In Capital like occurred with the initial $1 billion SPS issued for free, or with these gifted SPS as of September 2019. This offset wipes out the regulatory capital just built.
This operation needs a regiment of shills on social media stating that FnF are retaining earnings and they "continue to build capital" (Bill Ackman in the Pershing's letters and his subordinate Bradford), along with happy emojis all the time.
Screenshot: initial SPS issued for free and their offset that reduced the Core Capital, necessary for the option (G) (manufactured) LOSSES, that justified the conservatorship, among other losses (dividend, provisions for modified loans, DTA valuation allowance).

So, you are concealing this brand new covenant in the SPSPA and instead, you post the one above that doesn't apply. I guess that you are another member of the Tipp-Ex gang, specialized in covering up laws, rules and financial concepts.


It's corroborated in the Treasury press release at the time, making clear that there is no dividend to Treasury anymore.


Why is this important? Because there is a stark difference between them. The gifted SPS in the absence of dividend, are considered a capital distribution in the FHEFSSA's definition, 12 U.S. Code §4502(5)(A):

A payment in kind with respect to "other ownership interest" (SPS) in an enterprise

Therefore, restricted in the 12 U.S. Code §4614(e) and, because this capital distribution finally went through, it's applied towards the exceptions to the restriction in order to legalize it, primarily because it's the conservator's mandate to "put (restore) FnF in a sound (recapitalization) and solvent (reduce the debentures SPS) condition". For this precise case, FHFA's DeMarco had already prepared in the July 20, 2011 Final Rule, this case of continuation of the Separate Account plan, enacting the CFR 1237.12 that added ("(c) It supplements and shall not replace or affect the restriction on capital distribution by statute") more exceptions to the one in the statute mentioned before (to reduce the SPS), with exceptions 1, 2, 3, 4: capital distributions (deplete capital) authorized to build capital (recapitalization), that is, outside their balance sheets or, what is the same, in a separate account.
This effect is concealed with the Financial Statement fraud in FnF, when these gifted SPS and their offset, are absent from the balance sheets, but we can easily see how the exception "for recapitalization" works, with the Common Equity held in escrow (pending unwinding the whole Separate Account plan) in this adjusted table of Freddie Mac:

[kthomp19]

I should also mention that because the NWS was deemed a breach of good faith & fair dealing, that the current unpaid NWS dividend that is increasing the LP may need to be adjusted downward to 10% or 12%.

This makes no sense to me. Any adjustment of the LP would have to involve Treasury, but Treasury was not a party to the case in Lamberth's court at all. Treasury was not found to have violated the implied covenant because that covenant was only between the companies and the shareholders; why would they either choose to or be forced to take any action at all regarding the LP in light of the jury verdict?

The dividend percentages are all based on LP amounts, and unpaid dividends are added to the LP. No additional shares issued.

Right. The share count was set by the original Senior Preferred Stock Certificate at 1,000,000 and has never changed.

The current state is that the NWS is still in place, but now considered "unpaid dividends" which is why the LP grows by the entire net worth amount dollar for dollar. It's the same mechanism as above- in lieu of cash, the unpaid amount increases the LP.

Kind of, except that the LP increase is FnF's increase in net worth as opposed to the pre-NWS world when it was a percentage of the LP.