Replies to post #781984 on Fannie Mae-No Politics (FNMA)

[Rodney5]

"Non-Redeemable Preferred Stock", ??
DaJester, what law passed by Congress are you referring too?

Read it real slow, this has been posted on this board multiple times.

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, apply the law written in the HERA legislation passed by Congress.

Link to the Calculation:

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

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

[bradford86]

Calling shenigans on their gse balance sheets is a fools parade

[FOFreddie]

Great insight DaJester - great question and it really highlights how absurd the SPS is in the first place. How can it be that an investor gets a claim on the equity of the balance sheet for no consideration at all. How can it be that that claim based on no consideration given be senior to other equity investors who actually paid cash consideration for their shares?