Replies to post #836769 on Fannie Mae-No Politics (FNMA)

[Fully Diluted]

Here is the relevant section in HERA, starting at page 109 of 261:
https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf
It states that the LLRE „succeed to the charter“.
But I can't find anything there that says the charters should or can be resold or transferred. That doesn't make sense, I think, because the LLREs have to sell the “capital stock” within five years. It's not LLRE shares that are to be sold, but Fannie or Freddie's assets. And the LLREs are limited in time, as their name suggests. Once they are liquidated, the charters will also become obsolete. Because they will certainly not be transferred with the assets.

HERA does not provide for Fannie Mae to be liquidated in receivership only for its business to be taken over 1:1 by another company. Because it is assumed that Fannie has failed if it is put into receivership.

In other words, if Fannie Mae fails, its assets will be sold and the company, along with its charter, will disappear. It is wishful thinking to assume that Fannie can be placed in receivership in order to wind it down, but that a newly created company can take over the business, the business model, and the charter exactly as they are. That is not the purpose of receivership.

[Fully Diluted]

Thank you DaJester and Barron,

Yesterday was not my day, as I made claims without thoroughly researching them first. First, I overlooked the CBO report when I spoke harshly about Carney (although he always deserves it from an investor's point of view 🫢), and then I misinterpreted HERA with regard to receivership and LLRE. You were spot on, DaJester.

Let me summarize:
- HERA prohibits the FHFA from dissolving the charters of Fannie and Freddie. Page 115 of 261: PROHIBITION OF CHARTER REVOCATION
- FHFA has the option to sell shares of LLRE. Page 111: AUTHORITY
- LLRE takes over the charters of Fannie or Freddie. Page 110: …succeed to the charter…
- Although its status is temporary, once at least 80% of LLRE shares have been sold, LLRE loses its status as LLRE but continues to exist as an entity. Page 111: IN GENERAL

I now assume that the charters will remain in force, „…after the entity shall cease to be a limited-live regulated entity…“. Page 111
I think the purpose of the whole thing is that even after receivership, there will still be two GSEs that fulfill their charters / mission.

I'll save myself the time of checking whether it's even possible to put Fannie and Freddie into receivership under HERA at this point. Although I've come across the statement several times in this section alone that Fannie or Freddie must be “in default or in danger of default” I agree with Barron: what can you do if the administration simply does it?

I don't like having to correct myself. But I like it even less to knowingly leave false statements I have made uncorrected. 🧐

GLTY 😎

https://www.congress.gov/110/plaws/publ289/PLAW-110publ289.pdf