Monday, January 20, 2014

FNMA and FMCC have sent more money to the Treasury in dividends than the amount it borrowed

dell_stk  Nov 7, 2013 12:01 AM Flag

WSJ: FNMA and FMCC have sent more money to the Treasury in dividends than the amount it borrowed

Fannie Mae, along with Freddie Mac, is approaching the point at which it will have sent more money to the Treasury in dividends than the amount it borrowed over the past five years.

A few years ago, the conventional wisdom in Washington said that Fannie MaeFNMA -1.71% and Freddie Mac wouldn’t ever be able make taxpayers whole for the 2008 bailouts of the mortgage-finance giants.

Those who haven’t followed the companies closely will be surprised to learn that Fannie and Freddie are now on the brink of doing just that.

When the companies report their third-quarter earnings, which could take place as soon as this week, they could show that by the end of this year, they’ll have sent more money to the Treasury in dividends than what they borrowed over the past five years. (And if that doesn’t happen this quarter, it very likely will occur when the companies report their fourth-quarter earnings next February.)

Of course, Fannie and Freddie aren’t allowed to “repay” the money they’ve borrowed from the U.S. Treasury. Here’s how their agreement works: The government in 2008 agreed to inject massive sums of aid so that Fannie and Freddie would stay solvent, allowing mortgage markets to operate smoothly. In exchange, the Treasury took a new class of “senior preferred” shares in the companies that originally paid a 10% dividend; they also received warrants to acquire up to 80% of the firms’ common shares.

The agreement doesn’t provide any mechanism for Fannie and Freddie to buy back the government’s senior preferred shares, which now total $188 billion. If it sounds like Fannie and Freddie are making interest payments on a loan that can’t ever be repaid, that’s because they are. So any discussion of “repayment” needs this disclaimer: Even once Fannie and Freddie have paid $188 billion in dividends, they’ll still owe $188 billion.


Wonder how long after this earnings before multiple lawsuits filed for release of conservatorship. who lends 188 billion and then changes the rules to strip the company of all future income And then calls themselves the protector of the companies assets, THE FHFA does. I give it a week before they are sued for release. The original agreement would of paid the income, minus 10% to govt, to the shareholders and the stock price would be at least the 7 dollars it was before conservatorship dropped it to .39 cents. This is a communist move and should not be tolerated in America. Bully by FHFA

The 10% is not free money for the government. it counts toward repayment. Takings Clause, Tort Law, illegal self-dealing.

Those are the facts and we live in reality. But momentum has stalled to enact any type of reform. Investors plus governments are realizing it wasn't FnF's fault that the Mortgage Finance industry collapsed. It was the fault of the banks who shifted massive fraudulent loans on their books!
GSE's work well when endemic fraud is not happening!

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