That's the kind of arrangement every Fannie and Freddie shareholders should be looking forward to. There is no such things as SPS or warrants conversion. Fannie and Freddie have overpaid USG by $300B already. Time to release Fannie and Freddie, as a responsible GOV.
Plaintiff hired by Pagliara to repeat "repurchase of Warrant", AIG-style. FnF are NOT ordinary businesses. Guido was in charge of this role before. A security authorized only to (iii) protect the taxpayer, obviously protection from losses (Source). In this world that's called collateral. A guaranty for the repayment of a debenture. Obligations in respect of Capital Stock -SPS-, a debenture with the taxpayer that had to be paid back asap, which is what was done under the guise of dividend payments (Restricted and unavailable Earnings for distribution as dividend while undercapitalized by law and then, threshold of 25% of Capital Buffer by regulation -Table 8 of the Capital Rule: Payout ratio-)
There are ONLY 3 prerequisites in the Authorization of Treasury to Purchase Securities of FnF, after the determination of EMERGENCY: Conservatorship, pursuant to (G)manufacturedLOSSES: likely to incur losses that deplete all of its capital. About future losses, not past losses like this plaintiff repeats, echoing Washington Federal's lawsuit. Losses incurred with the Obama's programs (flawed Incurred Loss accounting standard), when FnF had to set aside a reserve equal to the concession granted to borrowers in modified loans; the 10% dividend either depleted capital or it directly caused the losses and subsequent draws from UST (SPS); the DTA valuation allowance; initial $1B SPS issued for free that reduced $1B the Core Capital -Additional Paid-In Capital account-, barred in the FHFA-C's Rehab power). All legal, but let's say that there was a problem of attitude.
The Warrant was issued for free (its value was debited from the Additional Paid-In Capital account -Core Capital- like any other security issued/increased for free. Breach of the FHFA-C's Rehab power) to evade this prerequisite on PURCHASES, as a kind of "entry fee" for a funding commitment that is an essential part of the Charter dynamics since the Charter's inception. So, don't tell me that FnF have to pay an "entry fee" for the funding commitment they are entitled to, as a last resort to fund its operations (section Purposes), better known as UST backup of FnF.
This UST backup is the reason why FnF get funds on the market just a few basis points above the Treasury yields, and not due to the big lie of "Govt Implicit Guarantee on MBS" or due to a machiavellian Conservatorship, where ST claims that now the MBS have an Explicit guarantee from the Treasury. More fallacies, because their MBS are now fully guaranteed by FnF as always. Besides, the Warrant was meant for the assault on the ownership by Wall Street. Clause 2.1 in the prospectus:
Finally, what's the point in repeating the Charter's Fee Limitation of the United States, if later you don't see it refers to a collateral too.
BOTTOM LINE The U.S. Treasury should be taught the lesson of its role in congressionally-chartered private corporations with a clear Public Mission that makes them increase their risk (section Purposes: charge less to low- and moderate- income families, countercyclical role in the secondary market during a financial crisis -2008, not COVID crisis- and Duty to Serve), different to the FHLBanks' Charter, otherwise there will always be a Goldman Sachs alumni out there scheming plans of deception, that will be hired by the Administration for a con operation.
The compensation to UST was assessed at a weighted average 1.8% cumulative dividend rate on SPS (applying a 0.5% spread over Treasuries. It was a 0.299% spread in the bailout of the FHLBanks by Congress in 1989 -GAO report-), netted out with the interests on $151 billion owed to FnF, as per the original subsection (c) any obligation of (b) redeemable obligations (such as SPS), in the Charter Act.
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