Of all the lies regarding Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), (GSE’s) the most pervasive of all is the 187 billion dollar amount. This figure is incorrectly used over and again when calculating how much of a profit the taxpayers have made off of Fannie and Freddie to date. It is breathtaking how this figure remains fixed in the public consciousness. It is even on the seemingly official http://projects.propublica.org/bailout/ site. It is repeated by virtually every media source and cited as gospel in every GSE discussion in DC.
Let me clarify this for everyone, when the GSE’s were put into conservatorship the terms were that they would have to pay a quarterly dividend to the treasury every quarter based on an annual rate of 10% per year on the aggregate liquidation preference of the senior preferred stock. The treasury forced Fannie and Freddie to borrow additional money from the government every quarter to pay the dividend. For documentation, I am attaching “Fannie Mae Reports Fourth-Quarter and Full-Year 2011 Results” from Feb. 29th 2012. On page two, it clearly shows Draw Request from Treasury in tan and the Dividend Payment to Treasury in purple. You will see that a total of 4.6 billion was requested from the treasury, and 2.6 billion of that was to pay the 10% dividend. This is further explained on Page 9 of the report where it states:
“The Acting Director of FHFA will request $ 4.571 billion of funds from Treasury on the company’s behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and
Treasury to eliminate the company’s net worth deficit as of December 31, 2011. Fannie Mae’s fourth-quarter dividend of $2.6 billion on its senior preferred stock held by Treasury was declared by FHFA
and paid by the company on December 31, 2011.”
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Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) February 2012
February of 2012 was the last quarter that Fannie had to borrow money from the government to pay the dividend. So when the 187 billion dollar figure is thrown around it is critical that people understand that 55 billion of that was immediately paid back to the taxpayers. The reality is that, thus far, the taxpayers have not only recouped their 132 billion dollar investment but have netted an 26 billion dollar profit so far. In comparison, the taxpayers invested 424 billion for all the other bailouts combined their profit, thus far, a paltry 15.7 billion!.
Let’s not stop here though let’s dig a little deeper. As we examined this lie closer we discovered that prior to the third-amendment profit sweep in August 2012 we find numerous sources that cited the correct amounts that Fannie and Freddie owed, they did not falsely include the interest payments in their figure. Many in the government regularly used the true amount prior to the sweep.
Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) why?
So why the decision to perpetuate this outright lie? When it became clear in 2012 that the GSEs were going to begin to generate massive profits, the government made the fateful decision to do the unthinkable. They hastily crafted a ploy to divert all of Fannie and Freddies profits right into the treasury.They amended the terms to change the dividend from 10 percent to become all of Fannie and Freddies profits. And so began an unparalleled attempt to twist the truth.This marked a critical point in the completely false narrative that has been perpetuated by our government to defraud the shareholders of Fannie and Freddie of any profits and in a larger sense to rob America of the ability to have an honest and open debate based on facts. Up until this point it was already very difficult to discern fact from fiction when investigating the role of the U.S. government in the conservatorships of Fannie and Freddie, after the sweep it became virtually impossible.
The more we closely examine every aspect of the governments role in the Fannie and Freddie conservatorships it becomes very clear that little of what they say can be trusted as being factual. I would highly suggest that there can be no meaningful discussions on housing finance reform in this country until the court cases have been resolved, and we can begin to decipher the web of lies that the government has created. Keep the Faith!
Fannie reports 4th quarter and full year 2011