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What They Are Saying: The Two Year Anniversary of the Third Amendment Sweep

 What They Are Saying

August Marks The Second Anniversary Of The Third Amendment Sweep. Fannie Mae Ironically Released Its 2nd Quarter Earnings Report That Morning.

Here’s What They Are Saying

It’s Time to End the Illegal-Taking of Shareholder Dividends. “There is an immediate and clear path forward. It begins with ending the federal government’s conservatorship of Fannie and Freddie and thereby allowing them to rebuild and flourish in the marketplace. We have to get housing reform right. It affects all of us, including those having difficulties with their home mortgage. To bolster our economy and move more Americans into the middle class, Washington can no longer afford to kick the can down the road. Watt and the FHFA can propel us forward by crafting an administrative solution that solves the right problems, follows the rule of law and supports a thriving housing market.” Charlotte Observer “How Mel Watt Can Fix Housing Finance in the U.S.” By Eva Clayton.

Ironic Timing of Fannie Mae’s Earnings Report. “Thursday’s earnings report comes on the two-year anniversary of the ‘third amendment sweep’ which obligated the GSEs – Fannie and Freddie (which also reported 2Q earnings Thursday) pay all of their future profits to the Treasury as dividends. At the time of the third amendment, the U.S. Treasury had purchased $187.5 billion in senior preferred stock to prevent the GSEs from becoming insolvent. The GSEs were paying a 10 percent per year dividend on this stock, with the payment of dividends through 2011 funded by additional Treasury purchases of senior preferred stock. Housing Wire “Fannie Mae Earnings Drop in Second Quarter.” By Brena Swanson.

Third-Amendment Sweep Snuck Into Existence. “On Aug. 7, 2012, with Congress in recess and few in Washington paying attention, Treasury quietly decided to change the 10 percent coupon to 100 percent. Every cent in profit made by Fannie and Freddie since that decision took effect has gone back to the government without regard for the investors who answered a call to invest in a government-sponsored enterprise. Aside from this stunning violation of the rule of law, this action broke faith with investors in a way that sets a terrible precedent for the GSEs and private investment.” The Hill’s Congress Blog “Stop the High-Stakes Sweep of Fannie and Freddie.” By Tim Pagliara.

Fannie Mae Has Sent $14.4B More to Treasury Than It Borrowed. “Fannie Mae said its second-quarter profit fell 64% as net interest income for the period declined. The government-backed mortgage-finance giant said it will have paid $130.5 billion in dividends to the U.S. Treasury Department after its planned $3.7 billion payment in September. Fannie Mae had received $116.1 billion in bailout funds from the government, and now the company and rival Freddie Mac are required to send the Treasury almost all of their profit as dividends. Fannie Mae said it hasn’t received any funds from the Treasury since the first quarter of 2012.” Wall Street Journal “Fannie Mae Profit Falls” By Michael Calia and Joe Light.

Investors Launch “Light of Truth FOIA Campaign” But some small investors are taking it upon themselves to provide another way in which Treasury might be legally compelled to hand over documents outside of the litigation. Calling it a ‘Light of Truth FOIA Campaign,’ investors are embarking on a coordinated campaign to use the Freedom of Information Act (FOIA) to gather what could be more damning evidence that the Administration new Fannie and Freddie was vastly improving when they enacted the Third Amendment sweep and raided shareholders’ investments. Investors Unite Blog “Light of Truth FOIA Campaign.”

Former Fannie CEO Leads the FOIA Charge. “It will be interesting to see how much information they disclose. We can then turn over denials for attorneys to review. This will be an excellent way to ensure that we keep the flow of critical data to the public. I know for a fact our message is having an effect across all spheres of influence and power. This will only help further our cause.” Value Walk “Fannie Mae, Freddie Mac: Light Of Truth FOIA Campaign Set To Launch.” By Tim Howard.

Legislative Reforms for Government-Sponsored Enterprises Are DOA. “The three legislative proposals to reform the government-sponsored enterprises have been met with jeers from investors and a thud of ³dead on arrival² by both chambers. The House¹s PATH Act, and the Johnson-Crapo and Corker-Warner proposals in the Senate would actually create more problems than any claim to resolve. In April, I led 50 members of Investors Unite – a nationwide coalition of Fannie and Freddie investors – to meet with legislators on Capitol Hill to explain the pitfalls of these bills.” The Hill’s Congress Blog “Stop the High-Stakes Sweep of Fannie and Freddie.” By Tim Pagliara.

FHFA Director Watt Should Exercise His Authority. “Short-term reform is indeed possible through administrative action to end the conservatorship. Ending the bitter legal wrangling surrounding the conservatorship – which has hurt investors and consumers alike – would boost the capacity for Fannie and Freddie to attract investment, build capital and ultimately protect taxpayers from another bailout. The Federal Housing Finance Agency and its new director Mel Watt have the authority to lead the way and ultimately put us on a trajectory to solving the right problem.” Charlotte Observer “How Mel Watt Can Fix Housing Finance in the U.S.” By Eva Clayton.

FHFA Director Mel Watt Can Make A Real Difference. “Federal Housing Finance Agency Director Mel Watt has an opportunity to end this sweep, which would go a long way to restoring investor confidence and further stabilizing the housing market. Congress, also, could encourage support for FHFA efforts to put a halt to this harmful executive action. Fannie Mae and Freddie Mac work best when they are able to freely go about their mission to assure the necessary liquidity in the housing market for accessible and affordable financing for prospective homeowners without a government leash constraining them.” The Hill’s Congress Blog “Stop the High-Stakes Sweep of Fannie and Freddie.” By Tim Pagliara.

 

About Investors Unite: Formed by Tennessee activist investor and CapWealth Advisors Chairman and CEO, Tim Pagliara, Investors Unite (www.investorsunite.org) is a coalition of private investors from all walks of life, committed to the preservation of shareholder rights for all invested in Fannie Mae and Freddie Mac. The coalition works to educate shareholders and lawmakers on the importance of adopting GSE reform that fully respects the legal rights of Fannie Mae and Freddie Mac shareholders and offers full restitution on investments.