Fannie Mae's and Freddie Mac’s charters were amended on July 30th, 2008, 38 days before Conservatorship began (September 7th, 2008) in order to approve a provision that will be very punitive to their shareholders during Conservatorship. The day of Conservatorship, the enterprises signed an Agreement with Treasury where the Treasury injects cash and receives Senior Preferred Shares with a 10% annual dividend in exchange.
The previous charter said that Treasury can purchase any obligation but these obligations shall have a “yield to be appropiate” taking into consideration the rate of the U.S. government’s debt. But the Treasury is not getting funds at a 10% annual yield but at a 0.11% annual rate.
Current charter updated with the amendment included:
http://www.freddiemac.com/governance/pdf/charter.pdf
Charter: SECTION 306 (c)
“Each purchase of obligations by the Secretary of the Treasury under this subsection shall be upon terms and conditions established to yield a rate of return determined by the Secretary to be appropriate, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the making of the purchase.”
Their charter was amended on July 30th, 2008 by enacting the "HOUSING AND ECONOMIC RECOVERY ACT OF 2008", in order to incorporate a subsection called "TEMPORARY AUTHORITY OF TREASURY TO PURCHASE OBLIGATIONS AND SECURITIES" to FnF's charters.
SECTION 1117
Basically the new amendment eliminated the previous cap in the yield so that the Treasury can approve later a scheme with a 10% punitive dividend, signaling: “Treasury is authorized to purchase any obligations and other securities issued by the Corporation under any section of this Act, on such terms and conditions as the Secretary may determine and in such amounts as the Secretary may determine.”
But the government is not empowered to trample shareholder and property rights. Fannie Mae and Freddie Mac are private shareholder-owned enterprises even in Conservatorship.
This usurer 10% dividend has widened the losses and subsequent draw requests to Treasury, issuance of Senior Preferred Shares and public harassment to Fannie Mae and Freddie Mac.
The Senior Preferred Stock Agreements could be deemed illegal with their previous charters and being part of the Conservatorship scheme, all could be deemed illegal. Just guessing, I've given you all the data, make your own opinion.
The Act enacted in July 2008 and incorporated in FnF’s charters, gave Treasury authority to use these new conditions (no cap in the yield,...) to provide stability to the financial markets, mortgage markets, to protect the taxpayer, etc… So, at that time they had the idea to put this amendment to work.
Curiously enough, the Warrant Prospectus gives Treasury the authority to assign its 79.9% stake in FnF, upon exercising the warrant, to any “Person” (private lenders,…) and that Person shall be deemed holder the exercise day in order to not make the Administration appear to be selling its stake in FnF to private lenders and avoid a public outcry. Point 2.1
http://www.treasury.gov/press-center/press-releases/Documents/warrantfrec.pdf
So, adding both ideas together, those who wrote the Act in July, 30th 2008, had the purpose of assigning the government’s stake in FnF to private lenders. The assault attempt on FnF by the banks was written 38 days before Conservatorship.
We are still witnessing the assault attempt on Fannie and Freddie’s functions by the big banks in connivance with some politicians that continuously are introducing bills in Congress with the only purpose to wind-down FnF or tarnish their image and inflating their losses with accounting losses.
FnF’s underlying business is profitable before the 10% dividend to Treasury and massive accounting losses and unrealized losses of their PLMBS and derivatives portfolio that shouldn’t have mark-to-market accounting (both are a buy-and-hold MBS investors and the derivatives are used as a hedge), and reserves for performing loans (Freddie Mac has just announced it will begin to securitize previously delinquent impaired-loans acquired to its MBS trusts in order to begin to write-up reserves, the securitization of performing modified mortgages -TDRs- should be next).
FnF are also awaiting the settlement for the 18 financial institutions sued with fraud last September, for selling them a $200 billion porfolio of securities with fraudulent information (other institutions haven’t been sued but I guess will settle as well, like Wells Fargo and PHH, because they are the first and sixth largest U.S. mortgage lenders, respectively). This means FnF have been victims, and now victims of an assault attempt.
In the meantime so many companies and household accounts around the world have been literally destroyed. OCCUPY CONGRESS movement has just begun. We are the 99.99% suffering the bankers-politicians linkage.
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The U.S. government can’t change a charter of a private company (FnF’s charter amended on July 30th, 2008) trampling shareholders and property rights:
1st. The U.S. government can’t take control of private property to pursue what was already written in their charters, that is, to provide liquidity to the housing market.
2nd.The U.S. government can’t take control of private property saying that it was needed to inject cash purchasing FnF’s securities with a 10% dividend, because their previous charter already contemplated the Treasury could purchase FnF’s securities “established to yield a rate of return determined by the Secretary to be appropriate, taking into consideration the current average rate on outstanding marketable obligations of the United States as of the last day of the month preceding the making of the purchase”.
In other words:
1st. When the housing finance market begins to freeze up, like it did in 2007, FnF’s step in to help the housing market providing liquidity becasue it’s what is written in their charter.
Proof:
-Remarks made by Mudd in Fannie Mae annual report 2006. “Recently, as credit issues have shaken the capital markets, investors seeking safety and liquidity have increased demand for our guaranteed MBS, and we have made significant gains in market share as a result (a trend that has accelerated into 2007).
-And he continues in the 2006 letter to shareholders: "As the market turmoil deepened and expanded beyond the subprime segment, Fannie Mae stepped up to play a stabilizing role."
http://www.fanniemae.com/ir/pdf/annualreport/2006/2006_annual_report.pdf
http://www.fanniemae.com/ir/pdf/annualreport/2006/ceo_shareholder_letter.pdf
Therefore, investors abandoned private-label issuances due to their risks and purchased agency-MBSs.
2nd. When the economy begins to go south, the government can’t seize a private company to inject cash if its charter (before being amended) already contemplated the government can inject cash purchasing securities or bonds “at an appropiate rate”, and by the way, that’s the so called “government’s implicit guarantee”.
Both must abide by the charters approved by Congress, but the U.S. government hasn’t complied with its part in the charter (provide liquidity purchasing securities “at an appropiate rate”).
It’s quite clear, the intentions back in July 30th, 2008, were what later was written in the Warrant Prospectus: to assign FnF’s stake to other entities.
The shareholders require to the U.S. government and Congress:
1st. Immediately release FnF from Conservatorship.
2nd. Immediately repeal the subsection called “TEMPORARY AUTHORITY OF TREASURY TO PURCHASE OBLIGATIONS AND SECURITIES” incorporated in FnF’s charters when the “HOUSING AND ECONOMIC RECOVERY ACT OF 2008” was enacted in July 30th, 2008.
Therefore, to go back to the previous charter and undo everything.
The shareholders could seek to recoup the price of the stocks the day before FnF’s charters were amended on July 30th, 2008.
If the government doesn’t want to inject cash in FnF anymore and to have healthier GSEs, it’s very easy: FnF ought to raise their guarantee-fee.
Treasury should have purchased any “notes, debentures, bonds, or other obligations”, such as convertible bonds (their conversion feature gives them features of equity securities), issued by Fannie and Freddie, “established to yield a rate of return determined by the Secretary to be appropriate, taking into consideration the current average rate on outstanding marketable obligations of the United States”, according to the previous charter. So, it wasn't necessary to amend it.
That’s the government’s implicit guarantee, and that’s the charter.
-The government’s implicit guarantee is: when Fannie and Freddie need funds the Treasury, as a backstop tool, may provide funds “at an appropiate rate”, according to the charter. That’s why the MBSs and Bonds backed by FnF (they aren’t backed by the government) will always be paid. Thanks to this government’s implicit guarantee, FnF can get funds at a rate a few basis points above the Treasury’s yields in the market.
-The government’s implicit guarantee is not: Treasury provides funds to FnF at a 10% rate after the seizure of a private company under Conservatorship and all the shareholder and property rights are taken out.
_______________________________________________
FREDDIE MAC GETS FUNDS AT A 6% ANNUAL RATE. OUTRAGEOUS!
Freddie Mac issued this bond on 05/27/2009
http://www.freddiemac.com/debt/data/cgi-bin/cusipdetail.cgi?cusip=3128X8G89
CUSIP DETAIL: 3128X8G89
Amount Issued: $600,000,000
Issue Price: 18.524318000000001
Zero coupon
Maturity Date: 05/27/2039
But it was redeemed 18 months later at a price of 20.1537 http://www.bloomberg.com/news/2010-11-29/freddie-mac-redeems-zero-notes-due-2039.html?cmpid=yhoo
That is 8.8% for 18 months or a 6% annual rate. Outrageous!
But I’ve just mentioned FnF get funds at a rate a few basis points above the Treasury’s yields thanks to the government’s implicit guarantee.
Who has purchased this bond?
How many bonds with high yields have been issued since Conservatorship?
Have been used Fannie and Freddie as a tool to bailout the big banks by improving their books with this high yield bonds?
People want to know.
Not only Treasury may provide funds to FnF “at an appropiate rate” (that is the government’s implicit guarantee or government’s bailout) according to their charters (Law), but also the Law says the government ought to pay FnF for the Making Home Affordable programs (both HAMP and HARP). Even they are called Obama’s programs!
Congress approved payments under TARP for MHA program. TARP disbursements updated: as of November 25th, just $1.94 billion out of $29.88 billion committed on MHA.
http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/tarp-daily-summary-report/Pages/default.aspx
The U.S. government can’t take control of private property to protect the United States economy (it’s the Fifth Amendment), even if it determines Emergency (provision approved on July 30th,2008):
(B) EMERGENCY DETERMINATION REQUIRED.—In connection with any use of this authority, the Secretary must determine that such actions are necessary to—
(i) provide stability to the financial markets;
(ii) prevent disruptions in the availability of mortgage
finance; and
(iii) protect the taxpayer.
The government can't self-impose a function as taxpayer protector in order to trample shareholder and property rights. Even in Venezuela, Hugo Chavez pays the private company when he decides to nationalize it.
This is not a question if the U.S. government and Republican Party want to bailout FnF or not, or pay FnF for the MHA program or not.
It’s the Law and even Congress must abide by the Law.
1-Bloomberg News reports today that Henry Paulson disclosed nonpublic information on Fannie and Freddie Conservatorships in a meeting with “a dozen or so” hedge-fund managers on July 21, 2008.
http://www.bloomberg.com/news/2011-11-29/how-henry-paulson-gave-hedge-funds-advance-word-of-2008-fannie-mae-rescue.html
“Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.”
2-WARRANT. Paulson didn't profit from the information or trade on it, but his objective was the assault on Fannie and Freddie’s functions by the big banks: the Warrant prospectus signalled the government’s 79.9% stake may be assigned to other Person (private lenders, etc…). Commented above. And also it’s his current view: Nov. 18th, 2011: “those agencies have got to be just radically reformed and downsized.”
Source: http://www.nationalreview.com/articles/283465/paulson-s-downpayment-brian-bolduc?pg=1
A few days after Conservatorship began, Lehman Brothers, surprisingly, was allowed to file bankruptcy, triggering a global financial shock (it prompted the markets to freeze up). Coincidence? (Even current president of IMF Lagarde, phoned her friend Paulson at that time telling him it was a mistake, remarks made in a recent Al-Jazeera documentary in english about the financial crisis).
3- WARRENT BUFFET used to have a large stake in Freddie Mac, but on August 22th, 2008 he said: “Fannie and Freddie don’t have any net worth”. “The game is over as independent companies”
Source: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ar3Dc8YAkiIQ
At that time he was beginning to build his current stake in Wells Fargo, according to the article.
“Buffett said he may have increased his stake in Wells Fargo or American Express, without being more specific.”
Isn’t it weird to say FnF will no longer be independent and, at the same time, begin to build a stake in the U.S. largest mortgage lender? That’s why he said he was buying one “or” the other, and all before Conservatorship and before the Warrant was written.
Warren Buffet said on September 30th, 2011, in a Bloomberg TV Charlie Rose interview, that a few years ago “I made a lot of money out of owning Freddie Mac and Fannie Mae mortgage pass-throughs, I got a lot of interest income on that, but I also entered into getting a pretty much capital gain on it”.
Source: Around 19:08 http://www.charlierose.com/view/interview/11919
A pass-through security is a Mortgage-Backed Security (MBS), but it’s very difficult “to make a lot of money” with a fixed-income security backed by the U.S. government’s implicit guarantee. Was it utilizing derivatives instruments like CMOs? (CMOs, Collateralized Mortgage Obligations: derivative instrument, when issuing “private label” CMOs, they often use agency mortgage pass-through securities as collateral in some of the “tranches” -slices-) . We all doubt it because he’s said repeatedly “derivatives are weapons of mass destruction”.
I’m pretty sure, Paulson didn’t give Warrent Buffet any nonpublic information on Fannie and Freddie before Conservatorship.
Yesterday Bloomberg News said the same day Paulson spoke with NYT “to give a signal of confidence to the markets” on July 21, 2008, he held a meeting with hedge-fund managers with a different message.
But I’ve found other NYT’s article written before, on July 14th 2008, with the headline: “Bush offers plan to save Fannie, Freddie”.“The plan calls on Congress to give the government the authority over the next two years to buy an unspecified amount of stock in the two companies. Over the same period of time, it would permit the companies to have greater access to the Treasury, by expanding the credit line that each company has from the Treasury.”
”Announcement of the plan on Sunday evening was intended to send a sharp signal to both stock markets and debt markets that the government was standing behind the beleaguered companies.”
“senior officials at both the Fed and the Treasury have been talking in recent days of possibly taking steps to “harden the (implicit) guarantee.”
http://www.nytimes.com/2008/07/14/washington/14fannieweb.html
A U.S. Treasury Secretary can’t give one message to the markets and a different message to his friends hedge-fund managers in order to accomplish his objective: break-up of FnF among the big banks.
Short-sellers were not enough, that’s why he needed a global financial shock in his attempt to wipe-out the shareholders and Lehman was allowed to file bankrupcty. But he now has learned, when a financial shock begins, nobody knows how it evolves and ends. 99.99% of the population has learned it as well.
The politicians-bankers linkage is the disease of the world.
It's time for a judge to step in, he will explain to the american people that the Government’s implicit guarantee=Lender of last resort=Backstop tool=Government-Sponsored Enterprises=Government’s bailout=”Treasury may purchase any obligations at an appropiate rate”, according to their charter.
“Fed statement on Freddie Mac, Fannie Mae
Sunday Jul 13, 2008
The Board of Governors of the Federal Reserve System announced Sunday that it has granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary. Any lending would be at the primary credit rate and collateralized by U.S. government and federal agency securities. This authorization is intended to supplement the Treasury's existing lending authority and to help ensure the ability of Fannie Mae and Freddie Mac to promote the availability of home mortgage credit during a period of stress in financial markets.”
http://www.reuters.com/article/2008/07/13/us-fannie-freddie-fed-text-idUSN1336142820080713
This is big news because it means Fannie and Freddie had on July 13, 2008, unlimited line of credit at below-market rates approved by the Federal Reserve!!!!
FnF have just a $2.25 billion credit line with Treasury, set 40 years ago by Congress. At the time, Fannie had only about $15 billion in outstanding debt. In 2008, it had total debt of about $800 billion, while Freddie had about $740 billion. (It’s of common sense to think the limit was obsolete and should be updated).
Anyway, if FnF had already an unlimited credit line with the Fed approved, both the Senior Preferred Stock Agreement with the Treasury and Conservatorship were not necessary.
Unless the only purpose of H. Paulson was to wipe-out FnF's shareholders in order to break-up FnF among the big banks, trampling the shareholder and property rights.
FnF’s charters were amended on July 30th, 2008 to lift the $2.25 billion cap in the credit line with Treasury, but Congress forgot to include the phrase “funding at an appropiate rate” included in the previous charter. Anyway, FnF had already an unlimited Fed credit line approved.
H. Paulson took advantage of this mistake to trample shareholder and property rights.
Bloomberg Markets magazine reported a few days ago an exclusive about a $1.2 trillion secret Fed loans to banks in just one day.
http://www.bloomberg.com/news/2011-11-28/secret-fed-loans-undisclosed-to-congress-gave-banks-13-billion-in-income.html
Yesterday, Fannie Mae’s CEO mentioned another secret lending program to banks: “Through our early funding program, we have also provided over $290 billion in short-term liquidity for small and medium-sized lenders so they can continue to meet the demands of their customers during unsettling economic times. Banks — including many small and medium-sized lenders — simply would not continue lending on this scale without liquidity from Fannie Mae.”
http://financialservices.house.gov/UploadedFiles/120111williams.pdf
Now you know what FnF are doing with the taxpayer assistance.
Treasury is utilizing FnF as a Federal Reserve tool with funtions of lender of last resort or a shadow TARP to provide liquidity to banks.
This is how Conservatorship works: Increase the Reserve Fund from 0.38% before Conservatorship to 2.06% as total mortgage portfolio ratio (FMCC), due to provisions just because a mortgage has been modified and for acquired impaired loans regardless if they are performing and reserves for unrealized losses in PLMBS and derivatives portfolio. Therefore, the bulk of the reserve fund in not for expected losses. Once FnF begin to be sitting on a cash mountain due to these reserves set aside, Treasury forces them to lend to banks.
The Fed announced on May 24 it will use FnF to reverse repo couterparties activities to eventually drain cash from the financial system because the amount of cash both are lending daily to the financial system.
http://www.reuters.com/article/2011/05/24/usa-fed-gse-idUSNYD00380920110524
Cash and cash equivalents, restricted cash, federal funds sold and securities purchased under agreements to resell and non-mortgage related securities (Treasury Notes,…) as of end September:
Freddie Mac= $54.5 billion
Fannie Mae=$116.2 billion
Do they record this massive lending to banks as “securities purchased under agreements to resell”?
The FHFA prohibits FnF from offering new products, but it seems that lending to banks is allowed to help the overall economy.
BOTTOM LINE
The U.S. government can’t take control of private property to protect the United States economy (Fifth Amendment), even if it determines emergency (commented on November 28th).
A lawsuit filed against the government in the U.S. Court of Federal Claims in Washington is needed.
I’ve written that Treasury refused to abide by the Law providing funds to Fannie and Freddie “at an appropiate rate” according to their charter, and also the Fed had already approved a credit line. But instead, the government decided the seizure of FnF.
On the contrary, on March 23, 2009, Treasury approved a scheme called Public-Private Investment Funds (“PPIFs”) to provide federal funds to private investors with the objective to buy Private-Label MBSs and leverage the investment 7-to-1 with federal funds guaranteed by FDIC.
In other words, the investment will have 85% debt provided by the Federal Reserve and Treasury. The equity part of the investment (15%) would be shared 50-50 private capital-Treasury capital.
http://dpc.senate.gov/pdf/wh/032309_ppip_whitepaper.pdf
7 asset-purchase power= 1 equity + 6 public funds guaranteed by FDIC
The FDIC will receive a fee in return for its guarantee.
Example: mortgage with face value=100 ; purchase price=84 ; Treasury capital=6 ; private capital=6; Debt=72
But the Federal Deposit Insurance Corporation (FDIC) is the entity that insures the deposits of the taxpayers in banks for at least $250,000. “The FDIC insures deposits only”, read in its website.
Program: http://dpc.senate.gov/pdf/wh/032309_ppip_whitepaper.pdf
9 months into the program, the 8 priviledged hedge-funds chosen were gaining up to 20%.
Source: http://www.nytimes.com/2010/10/10/business/mutfund/10distress.html?src=busln
BOTTOM LINE
Hedge-Funds are being allowed to use low-cost government financing, government guarantees and government equity as incentives, but FnF were prohibited to receive Treasury or Fed funds “at an appropiate rate” even if it’s included in their charters.
*It’s worth mentioning a second part of the program where a private investor would be qualified to be Fund Manager (FM) so that he would be allowed to share capital with Treasury and leverage the capital to 2-to-1.
This second program is tailored to the chamber-investor called Warren Buffet and other billionaires because here I show you a letter to Henry Paulson back in October 6, 2008 where he proposes a similar structure (5-to-1 leveraged-entity funded with a Treasury credit line where he would be willing to personally invest $100 million). This second part of the program should be called “Buffet’s rule”.
Letter at the bottom of this webpage http://pragcap.com/the-many-myths-of-warren-buffett
Basically Warren Buffet was proposing a replica of FnF but funded by Treasury. Now you know why he continuosly is saying FnF were the cause of the crisis.
They all want to wipe-out FnF’s shareholders to take their functions.
A JUDGE SHOULD STEP IN.
2-Are you still shocked after learning that Fannie Mae had a program to bailout small and medium banks in the peak of the financial crisis?
While the bailout was ostensibly designed to protect the United States economy (MHA program called Obama’s program) and rescue the country’s financial system (Fannie Mae early lending program to banks), the ends could not and did not justify the unlawful means employed by the government to achieve that goal.
FnF, with a GSE status, already had Treasury funding contemplated in their charters “at an appropiate rate” and a Federal Reserve credit line approved a few weeks before Conservatorship.
This case involves the loss of property value through regulation and a lawsuit ought to be filed in the U.S. Court of Federal Claims in Washington.
That court handles cases against the federal government for money, including claims that the U.S. took private property for public use without just compensation in violation of the Fifth Amendment to the Constitution.
It seems that H.Paulson went crazy at that time, leaking confidential information to everybody about his plan to put FnF under Conservatorship and wipe-out their shareholders.
NYT reported on July 11, 2008, “U.S. weighs takeover of two mortgage giants”. “Senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday”.”Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing”.
http://www.nytimes.com/2008/07/11/business/11fannie.html?pagewanted=all
This article cites “government officials”.
This news was leaked on July 10th, and published on July 11th. Freddie Mac opened 50% lower in the stock market that day, but closed just 3% lower thanks to this H.Paulson’s statement:
The following statement was posted online by the U.S. Department of the Treasury on July 11th:
Secretary Henry M. Paulson, Jr. made the following comment today on news stories about "contingency planning" at Treasury:
"Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.
"We appreciate Congress' important efforts to complete legislation that will help promote confidence in these companies. We are maintaining a dialogue with regulators and with the companies. OFHEO will continue to work with the companies as they take the steps necessary to allow them to continue to perform their important public mission."
http://money.cnn.com/2008/07/11/news/companies/paulson_statement/index.htm
H. PAULSON’s PLAN: leak confidential information to NY Times and hedge-fund managers (Bloomberg Magazine’s exclusive) in order to destabilize the financial markets with uncertainty and lower FnF’s stock prices. His objective was to use later the provision called: EMERGENCY DETERMINATION REQUIRED, to take over FnF. That provision was approved by Congress and incorporated in FnF’s charters when HERA was enacted on July 30th, 2008.
In the meantime he was giving an official message of confidence to the shareholders and market: “support FnF in their current form”. That’s the angel-devil role.
This is the story of the plot to financially strangle Fannie Mae and Freddie Mac in the run-up to take over FnF if Treasury determines “emergency”.
* July 9, 2008, William Poole, a former president of the Federal Reserve Bank of St. Louis, said that FnF were insolvent: “Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer”.
Poole should know that a liquidity problem due to illiquid markets for PLMBS has nothing to do with the solvency of a company.
Poole is “a long-time critic'', said at that time Sharon McHale, a spokeswoman for Freddie Mac.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=as4DEc5UFopA
Curiously enough, he appears in the recent Bloomberg’s exclusive about Henry Paulson-hedge fund managers insider-trading case:-The situation also generates some sympathy for Paulson. “It seems to me, you’ve got to cut the guy some slack, even if he tipped his hand,” William Poole says. “How do you prepare the market for the fact that policy has changed without triggering the very crisis that you’re trying to avoid? What is he supposed to say without misleading these people?”-
*July 10th, 2008, WSJ’s Editorial: “Investors are saying that a Bear Stearns-like run on the companies is a real possibility, and they're right”.”But one danger is a run on the debt of either company, putting pressure on the Treasury and Federal Reserve to publicly guarantee that debt to prevent a systemic financial collapse. In an instant, what has long been an implicit taxpayer guarantee for both companies would be made explicit”.”Investors are saying the chance of a collapse is greater than our politicians want to admit”.”Why is there so little Washington or Wall Street alarm about this?”.”Their risk of insolvency has grown”.
http://online.wsj.com/article/SB121565255349741343.html?mod=opinion_main_review_and_outlooks
*July 10th, 2008, WSJ frontpage: “Administration Ramps Up Contingency Planning as Mortgage Giants Struggle. The Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter, according to three people familiar with the matter, as the stock prices of both companies continue to fall sharply”.” Treasury officials are nonetheless talking about what the government could — or should — do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating.” “If investors suddenly decide they don’t want to buy the companies’ debt, the companies might have to unload some of their holdings”
http://online.wsj.com/article/SB121564782376340951.html?mod=hpp_us_whats_news
Fannie Mae tumbled 24% in early trading and closed 14% lower that day and paid a record yield relative to Treasuries on the sale of $3 billion in two-year notes. Shares of Freddie Mac which were down 34% at their low, closed with a 22% loss.
*July 11th, 2008, NYT’s unethical article commented yesterday.
*July 21th, 2008, H.Paulson-hedge fund managers chat (Bloomberg Market Magazine’s exclusive).
Note that FnF’s decline helped drag the broad stock market into bear market territory.
Treasury Secretary Paulson, hedge-fund managers, media, power, cronies, greed, chamber-investors, bankers, ex-Fed officials, trampling constitutional rights………..TOO SHIT TO PREVAIL (coming soon to theatres).
Paulson’s plan (“the strongest case” as he calls it): to create a financial turmoil in order to financially strangle FnF, making them have difficulties in accessing the capital and debt markets, while the enterprises report bad numbers due to the mark-to-market of their PLMBS trading in illiquid markets (they plummeted due to panic, the same assets Warrent Buffett wanted to purchase later with a fund just for “intelligent investors” with Treasury funding, as he describes it in the letter to Paulson, and now is managing a $400 million fund thanks to Obama's "PPIFs" program for FM, commented above).
H. Paulson explains the cause of the decision of Conservatorship in his book:
“But investors were losing faith in them -- for good reason. Combined, they already had $5.5 billion in net losses for the year to date. Their common share prices had plunged -- to $7.32 for Fannie the day before from $66 one year earlier. The previous month, Standard & Poor's, the rating agency, had twice downgraded the preferred stock of both companies. Investors were shying away from their auctions, raising the cost of their borrowings and making existing debt holders increasingly nervous. By the end of August, neither could raise equity capital from private investors or in the public markets. Moreover, the financial system was increasingly shaky.”
“We wanted to be sure we had the strongest case possible in the event they chose to fight”.
“But even now, at the 11th hour, we still had concerns that FHFA had not effectively documented the severity of Fannie's and Freddie's capital shortfall and the case for immediate conservatorship.”…“That was a big problem because only FHFA had the statutory power to put Fannie and Freddie into conservatorship”. "(Former FHFA’s director) Jim Lockhart, a friend of the president's since their prep school days. "Jim," I'd say, "you don't want to trigger a meltdown and ruin your friend's presidency, do you?"
...“Now, however, neither could raise any private money. The markets simply did not differentiate between Fannie and Freddie. We would not, either. I recommended conservatorship”
Book. http://abcnews.go.com/GMA/Books/book-excerpt-brink-henry-paulson-jr/story?id=9713451
If you read that chapter, it will scare the hell out of you.
That book should be psychologically studied.
Greenspan. Aug. 14, 2008: "They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted -- with necessary taxpayer support to make them financially viable -- as five or 10 individual privately held units," which the government would eventually auction off to private investors, he said.”
http://online.wsj.com/article/SB121865515167837815.html
On July 14, 2008 NYT said: “Those who denied the existence of the (implicit) guarantee included Treasury secretaries Robert Rubin, Lawrence Summers and Henry M. Paulson Jr., and Federal Reserve Chairmen Alan Greenspan and Ben S. Bernanke.”
-THE BANKER
On Sep. 28th, 2010. In testimony prepared for a House Financial Services Committee hearing, Michael Heid, co-president of Wells Fargo Home Mortgage mentioned: “U.S. government should gradually hand Fannie Mae's and Freddie Mac's loan guarantee functions to private companies”, “at least four, but not more than eight, such companies would be needed to serve the market. Groups of banks are seen as potential investors in the mortgage securities insurance companies”, “But the government would still backstop the mortgage industry by guaranteeing the principal and interest on securities for investors. “,“Mortgage downpayments, private mortgage insurance, shareholder equity and reserves that are generated from fees would stand between the companies and taxpayers.”, "These layers of private capital should insulate the taxpayers from paying claims on the guarantee," he said. WSJ’s article deleted, but I copied it entirely in other post.
And all this statement in Congress is a replica of the bipartisan BILL H.R. 1859 introduced last May 12th, 2011 in Congress. Therefore, Wall Street knew the plan 8 months in advance. Also it's similar to Greenspan’s view.
…But the plan failed last June.
-THE HERO
To be continued...
Deleverage-process rhetoric= another attempt to purchase assets at fire-sale prices by prompting a run on a bank.
Warren Buffett said in the 2008 letter to Paulson that he “talked with Bill Gross and Mohamed El-Erian of PIMCO” about the fund to purchase distressed-assets with low-rate Treasury funds. I guess that they are also one of the 5 FMs mentioned above, or they are managing Buffett’s $400 million fund, having seen his low-profile (he was incapable of explaining the fundamentals behind his recent purchase of IBM, he just said twice he got the idea in the bathroom).
Also there are multiple hedge-funds out there raising money to purchase distressed-assets. But there is one catch: there aren’t assets on sale at fire-sale prices in the market. That’s why everybody talks about the deleverage-process and solvency of the european banks with the objective to prompt a run on a bank.
Mohamed El-Erian:
“private creditors are forcing certain banks to de-lever -- a process that is amplified by the sharp decline in bank stocks and the accompanying erosion in capital cushions.”
“We are also witnessing a loss of trust in instruments that many market participants use to manage their balance sheet risks”
“across-the-board shrinkage in the balance sheet of the western banking system”
“Europe where some institutions (e.g., in Greece) are also experiencing meaningful deposit outflows.”
“With some banks teetering on the edge, certain European governments (e.g., Greece) will have no choice but to nationalize part of their financial system.”
-The same article appears in several places during the week:
http://blogs.reuters.com/mohamed-el-erian/tag/banks/
http://www.huffingtonpost.com/mohamed-a-elerian/eurozone-market-volatility_b_1129790.html
In the absence of the S.E.C., I would like to see 5 OWSers in the frontdoor of PIMCO’s headquarters. They should explain to Mohamed where fits this kind of articles in his body. Only articles talking about how to solve problems, like mine, are allowed.
Finally, it’s worth reading an article by journalist Matt Taibbi in Rolling Stone magazine contended that naked short selling had a role in the demise of both Bear Stearns and Lehman Brothers. Sound familiar?
http://www.rollingstone.com/politics/news/wall-streets-naked-swindle-20100405
We are at war.
It’s time to denounce all the attempts of the private sector or the republican party-bankers linkage, to operate with a government’s guarantee. Enough is enough.
Everybody criticizes Fannie and Freddie because they’ve got a government’s implicit guarantee in their charters. But the same critics want to operate with a government’s guarantee for themselves, what’s up here!
-Warren Buffett rushed to ask for a fund with government funding in the 2008 letter to Paulson.
-I bet Warren Buffett asked to make American Express FDIC-insured (he is shareholder)
-Goldman Sachs and Morgan Stanley status changed to bank and the deposits FDIC-insured.
-Obama’s PPIFs and FMs are FDIC-insured.
-Wells Fargo mentioned FnF shall transfer their functions to private lenders…MBS with explicit government's guarantee.
-BILL H.R. 1859: multiple associations issuing MBSs guaranteed by the government, and other bills introduced in Congress.
*Last week another attempt by chairman Scott Garrett, creating a Discussion Draft ‘‘Private Mortgage Market Investment Act’. Mark-up of the draft discussion tomorrow.
Garret talks about a new market for Private Label MBSs with better standarization and MBS disclosure (he should know the FHFA is already working on it). But at the end we have a surprise:
“SEC. 304. FDIC SAVE HARBOR.
If a pool of mortgages meets the standards set forth by the Federal Housing Finance Agency … and is securitized in accordance with the standards set forth under title I, then the Federal Deposit Insurance Corporation safe harbor rule under section 360.6 of title 12, Code of Federal Regulations,shall apply to the pool of mortgages.”
Which means that the U.S. government will have to eat all the toxic mortgages or MBSs the big banks issue.
http://financialservices.house.gov/UploadedFiles/PMMIA_bill.pdf
Scott Garrett, I caught you!
What’s up in the States? Everybody wants to be FDIC-insured.
Geithner should stop this psychopath behaviour of the business communtity.
Geithner should make clear which enterprises are GSEs and that no one more will be FDIC-insured or government- guaranteed. Geithner should draw a line in the sand.
Garrett, the big banks will never issue MBSs FDIC-insured. Their MBSs will be guaranteed by themselves. Good try though.
They all are so desperate to accomplish this objective, that are capable of prompting the worst financial crisis ever world-wide in 2008.
The effects of the financial shock in 2008 and the battle to accomplish their objective continue... We are at war.
Curiously enough, the S.E.C. accuses former FnF’s executives of making misleading statements to shareholders and the public about their exposure to mortgages with a higher risk than the conventional mortgages.
Basically, the S.E.C. accuses them of having an angel-devil role, the same accusation I made to Henry Paulson on the comment of December 5th.
Coincidence?
Everyone knows that George W. Bush was shouting out a policy of home ownership in the minority communities. He could have told these enterprises to boost the exposure to higher risk mortgages, which would increase the fees of the big banks that make these mortgages (FnF just guarantee the payments of these mortgages) until they give the “go” to their final resolution on FnF’s fate. I’m surprised to learn that the S.E.C. doesn’t mention J. Lockhart.
Former FHFA’s director Jim Lockhart, “a friend of the president's since their prep school days”, assumed the position of Vice Chairman of WL Ross & Co. LLC in September 2009. As Vice Chairman, Lockhart coordinates WL Ross’ investments in financial services firms and mortgages. WL Ross & Co. LLC is a subsidiary of Invesco, and it manages the Mortgage Recovery Fund, a fund that invests in Invesco’s Public-Private Investment Fund (PPIFs explained above).
BOTTOM LINE
J. Lockhart appears in the downturn and also in the upturn in the economy, like the chamber-investor mentioned above. Only in America.
*I see one mistake in this post. I’ve been wrong when I said the assault attempt on FnF’s functions by the big banks began 38 days before Conservatorship. It began a few years before.
The S.E.C. is wrong when says the purpose of the former executives was to increase FnF’s market share in order to receive fat bonuses. Primarily because sooner or later the information about their credit risk exposure would be brought to light, so it’s a stupidity to hide that information to the public, unless they were told FnF would be abolished in a few months’ time.
The purpose of the former executives, along with former FHFA’s director, was to increase FnF’s exposure to subprime and higher risk mortgages, but hiding it to the public and shareholders.
But that's the same purpose of the big banks when sold Private-Label MBSs to FnF with fraudulent securities, that is, they hid the information about the true quality of the mortgages packaged in a MBS to the public and shareholders. It’s the same attack to FnF coming from two different places.
But holding mortgages and PLMBSs with higher credit risk exposure (not all subprime) is not a problem. The problem comes when a financial shock suddenly appears.
And now is when we have to read again, the superb article of Matt Taibbi in Rolling Stone magazine in the link written above. I spent 12 hours a day watching the financial markets, and I say that at that time, it was not trading as usual.
Scott Garrett’s Private Mortgage Market Investment Act mentioned above was approved (AGREED TO) last December 14th, by a recorded vote of 18 ayes to 15 nays.
http://financialservices.house.gov/Calendar/EventSingle.aspx?EventID=272002
Remember that the act allows the big banks to issue MBSs with a government’s explicit guarantee (FDIC- INSURED). (FnF own government’s implicit guarantee, that is their MBSs are guaranteed by FnF but “Treasury may provide funds at an appropriate rate…”)
But there is one catch: they approved a Discussion Draft. The bill that incorporates the PMMI Act was formally introduced in Congress the previous day, Dec. 13th (bill H.R. 3644) but the House decided to vote the Discussion Draft and not the Bill.
H.R. 3644 http://www.govtrack.us/congress/bill.xpd?bill=h112-3644
The Republican Party didn’t dare to approve a bill that allows the big banks to issue MBSs with a government’s explicit guarantee, but a discussion draft.
Message to the Republican Party-bankers linkage: We will never allow the big banks to issue MBSs with a government’s guarantee. There will always be 9,999 of us for every 1 of you.
BOTTOM LINE
Nobody sees that this is the heart of the matter?
Nobody sees that this is the cause of the financial crisis?
To allow the big banks take FnF’s functions (to issue MBSs with a government’s guarantee), the assault attempt on FnF’s functions by wiping out their shareholders:
1st. To swell FnF’s portfolio with subprime and higher risk mortgages and PLMBSs hiding the information.
2nd. To prompt the mother of all financial shocks ever. Objective: financial markets turmoil triggering asset prices lower and FnF in conservatorship.
3rd. Language: A Key Mechanism of Control (Newt Gingrich's 1996 GOPAC memo). That is, to utilize the media to tarnish FnF’s image: multiple articles by WSJ, NYT (among others) or allowing other people to spread their message in these newspapers, like recently did Peter Wallison, co-director of financial policy studies at the American Enterprise Institute, writing in the WSJ and also appearing in Bloomberg TV and Jonathan Weil writing recently two incendiary articles in Bloomberg News saying that FnF cooked their books. http://www.bloomberg.com/news/2011-12-16/the-sec-s-fannie-freddie-cases-are-theater-of-the-absurd-the-ticker.html
The Far West period, isn’t that far. It’s still alive.
Ben Bernanke, the one that welcomed the U.S. troops when arrived from Irak a few weeks ago, yesterday made an unusual request to Senate and the House.
Bernanke’s white paper on housing:
-to forgive the fraud committed by the big banks when sold mortgages with fraudulent information to FnF. He recommends to stop the mortgage putback requests: “Aggressively putting back delinquent loans to lenders helps the GSEs maximize their profits on old business and thus limits their draws on the U.S. Treasury, but at the same time, it discourages lenders from originating new mortgages.”
-to use FnF to refinance ‘underwater’ borrowers with non-GSE loans. In other words, to sift mortgages with low revenues and high credit risk (LTV greater than 125%) to FnF’s balance sheet, instead of forcing the banks to do it as part of the robosigning-case settlement.
-Land Bank: another psychopath attempt to give the private sector low-cost government funding to operate. The private sector is forgetting to do business with risk.
-More loan modifications with principal reduction, that is, forgiving mortgage debt to a privileged few. Even Bernanke signals to reduce payments to less than 31% of borrower’s income in order to protect their second-lien mortgage held into the big banks’ balance-sheets, at the expense of FnF’s shareholders.
BOTTOM LINE
Basically, Benanke is urging a more aggressive use of Fannie and Freddie “in the near term” to recoup the economy (which translates into more losses to the enterprises),…
“unresolved role of FnF, in both the near term and long term-This paper does not discuss alternatives for longer-term restructuring-”
…and this is the same view of Henry Paulson, Nov. 18th 2011: “we really need to use Fannie Mae and Freddie Mac to do anything that’s reasonable to provide financial support to the mortgage market— in the short term, at least. In the long term, those agencies have got to be just radically reformed and downsized.”
http://www.nationalreview.com/articles/283465/paulson-s-downpayment-brian-bolduc?pg=1
According to NYT, Bernanke is one of those who deny the existence of the government’s implicit guarantee in FnF’s charters (commented above). Has he ever read the charters?
OCCUPY THE FEDERAL RESERVE, NO MORE PSYCHOPATHS RUNNING OUR COUNTRY.
The FBI must be reinforced. We are at war.
Ben Bernanke, Henry Paulson and former FHFA’s director J. Lockhart summoned former Fannie Mae’s and Freddie Mac’s CEOs, at FHFA’s headquarters on G Street.
“We wanted to be sure we had the strongest case possible in the event they chose to fight.
We decided to lead with Fannie Mae, figuring they were more likely to be contentious.
"Hank," he asked, "what's going on?
We'd been operating in secrecy.
We'd asked both CEOs to bring their lead directors.
Between our group from Treasury, the Fed's team, Lockhart's people, and Fannie's executives, there must have been about a dozen people in the glass-walled conference room.
He said that we all hoped they would agree to do this voluntarily; if not, we would seize control.
As he spoke I watched the Fannie Mae delegation. They were furious. Mudd was alternately scowling or sneering. Once he put his head between his hands and shook it.
Ben Bernanke followed and made a very strong speech. He said he was very supportive of the proposed actions. It was in the best interests of the country to do this, he concluded.”
Book. http://abcnews.go.com/GMA/Books/book-excerpt-brink-henry-paulson-jr/story?id=9713451
You can feel the tension in that meeting reading that chapter.
But now I’m gonna tell you in the next comment, what really could have happened in that meeting.
(Laughs…Laughs…..More laughs…..) We nailed it, didn’t we?
I’ve told all the participants in this criminal conspiracy against our own country to step up their philanthropic role, increase our appearances in TV shows, write books and articles to blame the Affordability Policy for the crisis, showing the hidden subprime portfolio of the enterprises, nobody knows it yet, but we. The American Enterprise Institute, WSJ and the NYT have agreed (Laughs). We need language, as a mechanism of control, working 24/7.
One of their books should be called “Reckless Endangerment”. I said. But my book will be called: On the brink. (Laughs)
“You could call it: On the wink” said one. And all of them wink at each other laughing.
One of them asked: What will happen if the financial shock that we are gonna prompt to transform the Housing Finance System and the overall Financial System, goes out of control, destroying millions of enterprises and household accounts around the world, and sending one entire world-generation to limbo? The chairman of the Fed rushed to respond: No way, my friend. I’ve studied the financial shocks during all my life. I’ve even invented a machine, similar to CNBC’s Jim Cramer’s. The first measure will be pulling the handle called: Massive Secret Lending to Banks (link above). All is ready and nobody will discover it (Lot of laughs) .
I added: Yeah, but don’t forget to help only the financial institutions we want them to survive, the others will disappear or will be gobbled up. Because the massive lending will be secret, we can argue the financial institutions have disappeared because they were highly leveraged and had no asset-collateral. Nobody will notice that what happened is that our friends, unlike the others, had received secret financial support with baseball-stamps as collateral.
The chairman of the Fed added: All is very simple, my friend. Nothing can go wrong. (laughs)
The billionaire, now almost trillionaire chamber-investor, will present my book interviewing me in a CNBC event. He now calls me “friend”.
Also we need a movie based in one of our books, where I’ll be portrayed as a hero in the peak of the financial crisis (More laughs). There are always stupid people out there that think a movie is a documentary. I have a contact in NYT, an ex-girlfriend, that knows several journalists hungry enough that will help. I need to tell the journalist about my meeting in June 2008 with Goldman Sachs’ Board of Directors in Moscow, before other people discover it, in order to make clear that I, as ex-CEO of Goldman Sachs, wasn’t conspiracing jointly with my former colleagues.
http://blogs.reuters.com/felix-salmon/2009/10/20/the-secret-paulson-goldman-meeting/
I need to make clear to the taxpayers that I just met with them in Moscow by chance. If someone asks where the journalist got the information, he could tell a bird twittered him the info, now there are many people confused about Twitter and the real twitters of a bird.
The chamber-investor is ready to help Goldman Sachs if necessary.
In case one guy with a laptop begins to write about our criminal conspiracy against our country, the Fed Chairman will have to welcome the U.S. troops to create a patriotic role for him.
A Federal Reserve Chairman welcoming the U.S. troops? Said one (Lot of laughs).
In no event, we will allow the enterprises to improve their books.The chairman of the Federal Reserve ought to put pressure with a White Paper on housing that will increase FnF’s losses. Two days later, a Fed governor must continue the pressure. Always remember our GOP memo: Language, a key mechanism of control.
A Federal Reserve Chairmain pressuring the Senate and the House? Isn’t it unconstitutional? Asked one of them. My friend, we are psychopaths, so we can trample the Constitution whenever we like. I responded. (Lot of laughs)
My ex-girlfriend at NYT, could make the newspaper write 5 articles (4 out of 5 in just 5 days, links in other post) pressuring the government about the principal reductions to distressed borrowers, that is, forgiving mortgage debt, which translates into more losses to the enterprises.
Also we could launch a rumor in the market about a "January surprise" in the form of a trillion-dollar massive mortgage-refinancing scheme, as a desperate measure. The pressure on the government will be huge.
Are the FBI and the SEC going ever to investigate the 2008-2009 personal income of the billionaire chamber-investor to see if he made a lot of money tumbling Fannie and Freddie’s related-securities utilizing insider-trading information? Yeah, the same insider-trading information you gave to “a dozen or so” hedge-fund managers at Eton Park’s headquarters. I know he is too old and could say he made a lot of money trading with the enterprises in a TV interview in three years’ time! The chamber-investor has the instruction to be always the President’s best friend, just in case we lose the next general elections, and even he will manage to make all the U.S. Presidents call him seeking advice, but he should never say it in a Bloomberg TV interview!… Signaled one of them. (everybody was petrified).
I responded: That will never happen. We are all in this together. (Everybody in the room was rolling on floor laughing).
Let’s party tonight, but I’ll write in my book that this day I went to bed at 9:30 p.m. , and that I'm an "early to bed, early to rise" fellow. (lot of laughs)
Now it was former Freddie Mac’s CEO turn, and Fannie Mae’s CEO left. As he came in the room, both wink at each other with a half-smile Gioconda’s style.
They all were excited feeling the “conspiracy experience”.
The government has just announced it pretends to use taxpayer money to pay the medical bills, credit-card debt, second-lien debt and other “higher levels of secondary debt” without specifying more, of a priviledged few.
http://www.treasury.gov/connect/blog/Pages/Expanding-our-efforts-to-help-more-homeowners-and-strengthen-hard-hit-communities.aspx
The FHFA ought to withstand whatever the pressure comes from populist politicians.
U.S.A. is not Hugo Chavez’ Venezuela.
Forget the mortgage debt forgiveness rhetoric. Everybody should pay at least the principal they owe.
I’ll say it again, the cause of the sluggish economy is the preservation of the nationalization of FnF, the lack of a comprehensive new “framework” in the Housing Finance System and the big banks’ reluctance to refinance underwater borrowers (non-agency mortgages).
1) Excerpt taken from the FANNIE MAE 10-K filed on May 2, 2007, but for the year ended December 31, 2005 (FNMA reviewed reports). Page 158
http://www.wikinvest.com/stock/Fannie_Mae_%28FNMA%29/Filing/10-K/2007/F1283803#437
“Statutory Critical Capital Requirement.
Our critical capital requirement is the amount of core capital below which we would be classified as critically undercapitalized and generally would be required to be placed in conservatorship. Our critical capital requirement is generally equal to the sum of:
* 1.25% of on-balance sheet assets;
* 0.25% of the unpaid principal balance of outstanding Fannie Mae MBS held by third parties; and
* up to 0.25% of other off-balance sheet obligations”
Also, on June 9, 2008, when the former FHFA’s director Lockhard classified Fannie and Freddie as Adequately Capitalized as of March 31, 2008 (one month after the 1Q SEC filings, why did it take so long to classify FnF? Is it because May-June were the happy-months? Management and regulator releasing happy statements and reducing the capital requirements, before the July panic-month), he mentioned: “The critical capital level is the amount of core capital below which an Enterprise must be classified as critically undercapitalized and generally must be placed in conservatorship”.
http://www.fhfa.gov/webfiles/1486/5608statement.pdf
http://www.fhfa.gov/webfiles/2155/1Q2008CapClass.pdf
Therefore, we know when FnF would be required to be placed in Conservatorship, it has to do with the Statutory Critical Capital. Let’s see what happened with that capital measure.
2) Fannie Mae (and fmcc) as of June 30, 2008 (filing 10-Q): Page 120. ($ in millions)
-Core capital: $46,964 ($37,128 fmcc)
-Statutory critical capital: $16,912 ($14,746 fmcc)
Therefore, Fannie Mae had 177% surplus of core capital over statutory critical capital (152% in the case of fmcc)
http://www.wikinvest.com/stock/Fannie_Mae_%28FNMA%29/Filing/10-Q/2008/F1283590#122
http://www.wikinvest.com/stock/Freddie_Mac_%28FMCC%29/Filing/10-Q/2008/F84967689#313
3) Fannie Mae (and fmcc) as of September 30, 2008 (filing 10-Q): Page 106
-Core capital: $16,645 ($10,839 fmcc)
http://www.wikinvest.com/stock/Fannie_Mae_%28FNMA%29/Filing/10-Q/2008/F1283554#168
http://www.wikinvest.com/stock/Freddie_Mac_%28FMCC%29/Filing/10-Q/2008/F84967664#313
And the Statutory critical capital? It doesn’t appear in the SEC filing of 3Q2008, the first filing after the enterprises were placed in Conservatorship.
Not only the Senior Preferred Stocks of the Treasury aren’t included in Core Capital (according to fmcc filing, page 138), but the first $1 billion worth of Seniors Prfd. Stock the Treasury received for free (without injecting cash) when the Agreement with Treasury was signed, reduced the Core Capital. Astonishing.
“The $1 billion decrease to additional-paid-in capital to record the initial senior preferred stock issued to Treasury is reflected as a reduction to core capital as of September 30, 2008”
The FHFA required to suspend the disclosure of capital measures after conservatorship.
All the hard work of the “group”, creating panic in the stock market to make Fannie and Freddie’s common and preferred stocks plummet (commented on December 6 and before, it will be updated), in order to reduce their Core Capital (sum of (a) the stated value of our outstanding common stock (common stock less treasury stock); (b) the stated value of our outstanding non-cumulative perpetual preferred stock; (c) our paid-in capital; and (d) our retained earnings), but they didn’t know that if they create panic in the market, the Statutory critical capital also declines (the value of the assets on-balance sheet decline, because they are the toxic Private-Label MBSs trading in illiquid markets).
*Note that fnma's Statutory critical capital on June 30 is just 1.8% above the Core capital of Sep.30, but if we add the $1 billion mentioned before to the core capital and reduce the Statutory critial capital of June 30 due to the market turmoil in the 3Q, the probability of the core capital to be above the statutory critical capital as of sept. 8 and sept. 30 is huge.
The shareholders require to know the amount of Statutory Critical Capital on September 8, 2008 (day of conservatorship), because it's the capital measure to place the enterprises in Conservatorship.
I bet the Statutory Critical Capital was below the Core Capital at the time.
http://open.salon.com/blog/ebano/2010/09/22/freddie-fannie_take_advantage_of_a_share_price_manipulation
We just won't be defeated.