Replies to post #781982 on Fannie Mae-No Politics (FNMA)

[DaJester]

So with the retained capital increasing, is the liability listed under the "Non-Redeemable Preferred Stock", or does it go to Shareholder Equity? Shouldn't there be a separate line item for Liquidation Preference that Treasury can demand redemption? If redeemed, that wipes out all of the shareholder equity.

ASC 505-10-50-4 - "An entity that issues preferred stock (or other senior stock) that has a preference in
involuntary liquidation considerably in excess of the par or stated value of the shares shall
disclose the liquidation preference of the stock (the relationship between the preference in
liquidation and the par or stated value of the shares). 3 That disclosure shall be made in the
equity section of the statement of financial position in the aggregate, either parenthetically or “in
short,” rather than on a per-share basis or through disclosure in the notes"

I'm no financial expert, but I'm calling shenanigans on FnF balance sheets.

[Wise Man]

The SPS have no par value or face value.
When a stock doesn't have par value, it has stated value. The same concept.
For the SPS stated value, which is how the company values its securities on the Balance Sheet, they have used the Liquidation Preference value, as the Preferred Stocks have a Liquidation Right that is what makes this obligation be recorded on Equity, otherwise it'd be recorded on Debt. This is why it's considered an hybrid financial instrument.
On the other hand, the JPS do have par value of $25 or $50 per stock, and it's the stated value chosen to be recorded on their balance sheets. The par value coincides with the Liquidation Preference value.
Other companies use the Liquidation Preference value as stated value as well.

It represents the debenture that the companies have with their holders, as the underlying security in a Preferred Stock is an obligation. This is why their par value/face value/stated value isn't a symbolic amount ($0.1ps for instance) like in a common stock.
The amount ponied up by the common shareholders is reflected in other account: Additional Paid-In Capital account.

You keep on suggesting that the SPS and the LP are different things.

The liquidation preference keeps going up. The face value does not.

You call the $193B worth of SPS that shows up on the balance sheet "face value" and the SPS that are missing "LP". More trash talk to defend the indefensible: the absence of $118B SPS LP from the balance sheets. A Financial Statement fraud, for which we are requesting a compensation.
The LP of the SPS increases 1:1 in the amount of draws from the Treasury. This is why it's called Variable Liquidation Preference SPS. Another fraud by the way, because the stocks must be issued/purchased/dated, not LP increase (goal to skip the December 31, 2009 statutory deadline on the Authority of Treasury to PURCHASE obligations and securities)

So, all the SPS value is LP because the LP is the way the SPS are valued at. They don't have face value or par value.

The cbo report monetizes the face value of the spspa.

For instance, the balance sheet of Freddie Mac shows $72.6B SPS LP as of September 30, 2023, when the actual amount of SPS LP stands at $117.3B, including the $2.7B LP that was scheduled to be increased on December 31, 2023, that must show up as well under acccounting rules.


Therefore, not only $44.7B SPS LP is missing on the Balance Sheet, but also its offset when someone issues/increases stocks for free (without getting the corresponding cash, like stock dividends for instance) in the form of reduction of the Retained Earnings account in $44.7B.

Nothing is hiding. It is all there,

For instance, this is what happened on day one of Conservatorship, when FnF issued $1B worth of SPS LP for free. It was debited (offset) from the Additional Paid-In Capital account (now exhausted). They do appear on the Balance Sheet.


On the other hand, all the SPS LP increased for free as of December 2017, is missing.

This way, the current $44.7B Net Worth has been built solely with this increase in the SPS LP that is missing (Capital Stock), not with Retained Earnings (Core Capital; CET1) as you and your boss, Bill Ackman, repeat ("FnF continue to build capital").
Watch this effect visually in this image of Freddie Mac in Q3:


What lies behind is that your gang wants to meet the capital requirements with the increase of SPS to the Government, instead of with the regulatory and statutory metrics, like Core Capital, deep in the red. This is why the Treasury recommended to repeal the statutory definitions regarding capital and the ERCF tables, in light of the 2021 Capital Rule, are being concealed.