Fannie and Freddie never even needed government "help," they had much more capital than was required and were successfully raising capital in the private market! Government just wanted to use them like puppets to buy all the toxic junk the banks still had (that the banks originated.) Fannie and Freddie bailed out America.
The Takings Clause of the Fifth Amendment of the Constitution guarantees that all of the "dividend" payments go toward principle, and the government cannot take one dime more after repayment is finished, which will be soon. Conservatorship ends when Fannie and Freddie have "sufficient" capital again, which would be very soon after that, or the conservator is sued and conservatorship ended by the courts. Very simple. Solvent companies in conservatorship are never liquidated or wound down. If the government did so, the Takings Clause guarantees that the government must compensate us in full, for complete enterprise value and future profits, taking into account their roughly 90% market share (between Fannie and Freddie.) They would have to pay more than $300 billion for the company, easily more than $60 per common share. Fannie and Freddie remain private, shareholder owned companies with tremendous value.
The 79.9% figure is merely the common stock ownership the Treasury would have in Fannie and Freddie if they couldn't repay their debts and the Treasury exercised their options for common shares, as an alternate way of being repaid. Since Treasury will soon be repaid IN FULL, they can't exercise those warrants without violating the Takings Clause and having to compensate us fully (for 79.9% of the companies' fair market value, including future profits!) If people understood their Constitutional rights, FNMA would be trading aboge $40 already. What's going to happen, a bloody communist revolution where the Constitution is torn up and thrown out? The chance of that succeeding is zero. |
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