The GSES were forced to borrow the money because the Government needed a way to get the then toxic loans off of the TBTF balance sheets and also to assuage China that everything was stable. The GSES were the vehicle that the Government needed to accomplish this. This doesn’t also consider that both companies passed their stress tests just months before with flying colors! If it wasn’t for Treasuries need to clear the toxic debt off of the TBTF banks balance sheet’s so that they could bring liquidity back into the market place Fannie and Freddie would not have purchased that debt and the banks for the most part would have gone the same way of Lehman and Bear Stearns.
Blow said Quote: My argument is, if they didn't need money why did FNMA draw 120B from the fed and why did Freddie draw 72B? Maybe they were forced to, but I haven't found sources anywhere that say that. I am more than willing to be proven wrong.“ End of Quote
SOURCES:
'Deferred Tax Assets' the Treasury forced the companies to write down and record these non-cash expenses making the companies appear bankrupted. Fannie Mae and Freddie Mac were no where near bankrupted.
Mr. Howard wrote below,
Quote: “Between the time Fannie and Freddie were put into conservatorship and the end of 2011, well over $300 billion in non-cash accounting expenses were recorded on their income statements. These non-cash expenses, most of which were discretionary, eliminated all of the Companies’ capital and forced them, together, to take $187 billion from Treasury. But because accelerated or exaggerated expenses cause losses that are only temporary, Fannie’s and Freddie’s non-cash losses began to reverse themselves in 2012. Coupled with profits resulting from a rebounding housing market, the reversal of these losses enabled both Companies to report in August 2012 sufficient second quarter income to not only pay their dividends to Treasury but also retain a total of $3.9 billion in capital. As soon as it became apparent that a large percentage of the non-cash accounting losses booked during the previous four years was about to come back into income, Treasury and FHFA entered into the Third Amendment to the PSPA. The Third Amendment substituted for the fixed dividend payment a requirement that all future earnings—including reversals of accounting-related expenses incurred earlier—be remitted to Treasury. From the time the Third Amendment took effect through the end of 2014, Fannie and Freddie paid Treasury $170 billion, $133 billion more than they would have owed absent the Amendment.” End of Quote
Fannie Mae and Freddie Mac's regulatory guidelines would have prohibited the companies form paying dividends to the Treasury while severely under-capitalized, but the FHFA suspended those guidelines because the regulator wanted the companies to have to draw more senior preferred stock from the Treasury to pay the annual dividends in cash, ballooning their outstanding senior preferred stock and increase their required annual dividends. FHFA and its Director are executive branch entities and can not make changes to federal laws. Only Congress can change the law. Neither the Charter Act nor did HERA authorize the Treasury to charge a commitment fee.
When Fannie Mae and Freddie Mac were taken over by the FHFA no emergency existed and the FHFA had no authority granted by Congress to take over the companies, no authority written in the Charter Act that gave the FHFA right to take down the companies.
Charter Act: SUBSECTION (g) TEMPORARY AUTHORITY OF TREASURY TO PURCHASE OBLIGATIONS AND SECURITIES; CONDITIONS.— EMERGENCY DETERMINATION REQUIRED. Page 16
Under this subsection no emergency existed.
This leads to the question, who authorized the appropriation of taxpayer debt to provide the 200 billion commitment? Certainly not Congress. Treasury took it upon themselves and authorized a 200 billion commitment available in exchange for One Million Shares (1,000,000) with an initial liquidation preference of $1,000 per share. Shares of senior equity illegal and unconstitutional.
Charter act prohibits the commitment fees (Seniors, warrants, variable liquidation preference). More importantly the actions of Treasury to appropriate 200 billion in taxpayer debt, take non regulatory control of the companies through the SPSPA (require Treasury permission at least 10 separate times) and ownership of more than 50% of the companies requires them under the GAO act and the CFO act to consolidate the GSEs onto the nations balance sheet. The fact that that hasn't happened means the Treasury has violated the 14th amendment to the Constitution by repudiating the 5 trillion plus in debt the Treasury has acquired through their actions since 2008. Their actions have resulted in a takings of the entire enterprise value of the formerly private companies. These actions have necessarily turned the GSEs back into agencies of the executive branch as they were originally created. This is the definition of a major question and also a separation of powers problem since Congress did not authorize the actions Treasury took and continues to take.
News 
Market Data 
Discover 
AI
