Excellent post Robert… If I may add a few more words. Deferred Tax Assets fabricated losses...
Concrete Life Preserver
“Treasury Secretary at the time of the takeover, Henry Paulson, revealed in his later book On the Brink that the takeover of Fannie Mae and Freddie Mac was essentially a corporate decapitation (“the first thing they’ll hear is the sound of their heads hitting the floor”), the imagery of an assassination resonated with anyone who had been at Fannie Mae in 2008. Employees felt blindsided. Mr. Paulson’s description of the takeover as an “ambush” is spot on. The “bailout”/takeover was unrequested, unexpected, and wildly unpopular.”
The intended effect was to drown the GSEs in debt that they never needed—a “concrete life-preserver”.
“I'm a straightforward person. I like to be direct with people. But I knew that we had to ambush Fannie and Freddie. We could give them no room to maneuver.” Quoted from On the Brink.
Deferred Tax Assets fabricated losses...
FHFA and Treasury engineered these large and early losses deliberately. But without these engineered losses, Fannie Mae would never have run out of capital, and would have survived the financial crisis stronger than ever.
Fannie Mae Form 10K For the fiscal year ended December 31, 2009
Quote: “The aggregate liquidation preference on the senior preferred stock will be $76.2 billion, which will require an annualized dividend of approximately $7.6 billion. This amount exceeds our reported annual net income for all but one of the last eight years, in most cases by a significant margin. Our senior preferred stock dividend obligation, combined with potentially substantial commitment fees payable to Treasury starting in 2011 (the amounts of which have not yet been determined) and our effective inability to pay down draws under the senior preferred stock purchase agreement, will have a significant adverse impact on our future financial position and net worth.” End of Quote Page 7
treasury can request to do this if they want in light of jury trial verdict. what do you say? or wishful thinking?
“In the event that any provision of this Agreement, the Senior Preferred Stock or the Warrant is determined to be illegal or unenforceable, then Purchaser may, in its sole discretion, by written notice to Conservator and Seller, declare this Agreement null and void, whereupon all transfers hereunder (including the issuance of the Senior Preferred Stock and the Warrant and any funding of the Commitment) shall be rescinded and unwound and all obligations of the parties (other than to effectuate such rescission and unwind) shall immediately and automatically terminate.”
Writing up the value of loans on the books - is profit - but not cash and then sending that write up to Treasury costs cash Writing up - from zero to full - a deferred Tax Asset of 50B after first writing it down at BOV insistence and sending that non cash income as cash to Treasury costs cash
wow
to date I have only thought of the write downs ---- and have said it is not a real cash loss - but it hurts BS Wow - writing back up --- so that there is NON CASH income that then gets swept away in NWS ----- ouch
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