Fannie Mae News
Bove commented on the bombshell Fannie news earlier today. Now he is out with more thoughts – see the latest below from Bove.
Depositions in GSE Case Show a Total Insensitivity to the Law
This Is Truly an Outrage
Some Very Simple Points
Here are some very simple points that have become available in the depositions in one of the Fannie Mae (FNMA/$1.48/Buy) lawsuits (I own this stock).
1. The Housing and Economic Recovery Act of 2008 was very clear concerning what it wanted done to Fannie Mae. A conservatorship was to be created and the conservator was to return the company to health if at all possible. The depositions that I read indicate that at no time did anyone in the Treasury Department intend to do what the Congress had asked. The goal was to strip the company of its capital and its earnings thereby rendering it insolvent. It is as if Congress did not exist.
2. The depositions make clear that the government knew that Fannie Mae did not have to make cash payments on its senior preferred issue but that it could make a payment in kind or in stock. When the government forced the net profit sweep on the company it stated that the company did not have the cash to make the payment on the dividend. This was not a requirement of the preferred and the government knew it.
3. At the time, the Treasury forced the company into the net profit sweep it was evident that management of the company did not agree. The reason is that it had just shown the Treasury that it would be profitable for the next 10 years; that it was about to get $50 billion in equity by reversing its deferred tax asset arrangement; and that it was about to start collecting refunds from banks on bad loans. It had the money to make the payment the government claims it could not make.
4. Despite having been told that Fannie Mae was going to have its deferred tax asset returned to the company (the $50 billion mentioned) a Treasury official signed an affidavit stating that it had no such knowledge.
5. The decision rendered in the case before Judge Royce Lamberth was made without the benefit of having any of this information. The Judge simply did not want to know so he would not even listen to the lawyers making presentation in his court. His decision was rendered with no knowledge of the facts and no contact with the disputants in the case.
6. The government has hounded the banking industry for the past 8 years that it must increase transparency. Information must be made freely available to the public. Anyone who reads the depositions made available would be appalled by the lengths to which the government is going to obfuscate, hide, and destroy information. It is the ultimate hypocrisy.
