Replies to post #792990 on Fannie Mae-No Politics (FNMA)

[Guido2]

Thanks Vancmike for staying on subject.

As I have stated before, when it suits them, the govt claims the SPS was an investment. At other times that it's a loan. FnF sent their equity to the Treasury until stopped by the Fifth Circuit Enbanc. Since then the the Liquidation Preference has grown for each $ of earnings as per letter of agreement signed between Calabria and Mnuchin. When Fannie states "amounts attributable to Senior Preferred Stock" Fannie is signifying that the SPS is considered a loan.

Also, as I have repeatedly stated, if the SPS were a loan, it was paid back a decade ago. If it was an investment, then the corporations have always been capitalized, and there's been no need for the conservatorship.

[jog49]

"how does FNMA create net worth if all income is sent to the Treasury?"

They don't! That's the foundation of this whole scandal started 16 years ago.

[kthomp19]

For all you accounting knowledgeable people, (I have a basic understanding), how does FNMA create net worth if all income is sent to the Treasury?

FnF are not sending any cash to Treasury right now, and haven't in almost 5 years. They create net worth by retaining their earnings.

What Treasury gets in return is a dollar-for-dollar increase to the liquidation preference of the senior prefs, but that increase is off balance sheet. Net worth is a balance sheet calculation, so FnF retaining earnings (on balance sheet) while increasing the off balance sheet LP really does add to net worth.