Nice thought although I lack your confidence that the laws applying to failure of Federally chartered corporations to maintain statutorily required capital are all that clear cut.
Driving investor hopes and the change in tone are the record profits Fannie Mae (FNMA) and Freddie Mac have been posting as the housing market rebounds from the worst recession since the 1930s. The companies are required to send almost all of those profits back to the Treasury. So far, they’ve remitted about $146 billion, which under terms of the bailout counts as a return on the U.S. investment rather than a repayment.
A "tax" on mortgages
In 2012, Congress changed the rules on the government-sponsored entities' conservatorship status. Since then, all profits from Fannie and Freddie are the government's, not shareholders'.
Congress is quite happy with its new cash cows. Fannie and Freddie have paid consistent billion-dollar dividends back to the U.S. Treasury, most recently returning $14.6 billion in the second quarter.
Why are you so positive. The dividend was .41 / share in the 4th qtr of 2008. It fell to .12 and has gone back up to .16. This is a business development corporation.
they loan money to companies banks won't touch. 90% of profits are paid out as dividends.
I suspect they are contemplating taking the company private. In several of the conference calls over the last several years they have mentioned rising competition for deals from private equity groups. It is hard for public companies to compete with private equity. Going private would remove restrictions on equity ownership and unincorporating would remove double taxation concerns.
he is long time basher on this board. Has been here bad mouthing NGPC for many years. He was one who posted they would not be raising the dividend anytime soon and then they announced an increased dividend two weeks later.
He has a strong opinion about many facts that are true. NGPC makes risky investments. That's their business plan. The dividend fluctuates with profits.
Fannie and Freddie Common Getting Interesting
BY Dan Freed| 09/13/13 - 11:54 AM EDT
Stock quotes in this article: FNMA, FMCC, FNMAS, FMCKJ
Find out if (FMCC) is in Cramer's Portfolio.
NEW YORK (TheStreet) -- Fannie Mae (FNMA_) and Freddie Mac (FMCC_) common shares hit their lowest level in four months Friday, suggesting it may be time to take another look at these admittedly speculative securities.
While big-name investors including Bruce Berkowitz, Perry Capital, Paulson & Co. and Claren Road Asset Management have tended to favor the junior preferred stock in the government sponsored enterprises (GSEs), Perry acknowledged in a July 7 lawsuit that it also owns common shares.
Perry's arguments in its suit, one of several filed by GSE shareholders in recent months, takes issue with an Aug. 17, 2012 amendment to preferred stock purchase agreements that sweeps all GSE profits into the Treasury's coffers. Less
Senior Preferred Stock Purchase Agreement with Treasury
Senior preferred stock outstanding and held by Treasury remained $72.3 billion at June 30, 2013. 1
»Dividend payments do not reduce prior Treasury draws.
»Any future draws will increase the balance of senior preferred stock outstanding.
Since entering conservatorship in September 2008, Freddie Mac has:
»Received cumulative draws of $71.3 billion from Treasury. No draws have been requested for the past five quarters; last draw request was $19 million for first quarter 2012.
Freddie Mac’s net worth was $7.4 billion at June 30, 2013. As a result:
»The company’s dividend obligation to Treasury will be $4.4 billion in September 2013.
»The company’s aggregate cash dividends paid to Treasury will total approximately $41 billion including the September obligation.
The amount of remaining Treasury funding currently available to Freddie Mac under the Purchase Agreement is $140.5 billion. Any future draws will reduce this amount
yes, FMCC was created by an act of Congress, so it can liquidated by an act of congress
Amended Purchase Agreement
On August 17, 2012, Freddie Mac, acting through FHFA, as Conservator, and Treasury entered into a third amendment to the Purchase Agreement.
The principal changes, which are consistent with FHFA’s strategic plan for Freddie Mac and Fannie Mae conservatorships, include:
»Replacement of the fixed dividend rate with a net worth sweep dividend beginning for the first quarter of 2013
»Accelerated wind-down of the retained portfolio
»Submission of annual risk management plan to Treasury
»Suspension of periodic commitment fee
All profit goes directly to the Treasury- net worth sweep dividend.
Nice thought but:
the Congress can close out FMCC any time they want.
FMCC has not paid back any bailout money, all profit goes the government, they still owe it all.
Now, it would seem kind of stupid to close out FMCC when it is making so much money if impacts federal deficit calculations and if they release it from conservatorship, the government has warrants for 80% of the common stock. Government could make a large pile of money on this without doing anything. Hard to understand why they want to eliminate FMCC but there is a large contingent of politicians that do.
The government never said they would guarantee the portfolios of the GSE. They gave them a line of credit at the Treasury so they would never have a liquidity problem and could always pay their bills. Their charter also mandated a minimum statutory capital requirement. When the charters were done, residential mortgages were always kept on the books at book value, there were no mortgage backed securities (except the ones that Fannie Mae and Freddie Mac and Ginnie Mae created), and there were no derivatives (at least none that would have been used by Freddie Mac). Using the accounting rules of the 1970's there was no way that FMCC could have violated their statutory capital requirement. Jump ahead to 2008 and mark to market accounting with assets that did not even exist when their charter was written, they violate their statutory capital requirement and what happens?
Now we know and it is not good for shareholders. I am still hoping that the original conservatorship agreement is reinstated. pay the treasury 10% on preferred stock and give the government 80% of the company. At the least us common shareholders end up with something. Owning and securitizing mortgages has been a good business for a long time. No reason to believe it will not be a good business in the future.
Amen to that - their dribble is so bad most of the time. I sometimes read one by mistake because their headline editor is so good.
your absolutely right. except it is probably too late know. life on earth will soon end as a result of GMO in infant formula.