“You Can’t Handle The Truth!”

Just like Colonel Jessup played by Jack Nicholson in the movie A Few Good Men was adamant that his actions were just though illegal, we find similar examples of these actions by members of our government.

The actions are buried deep in the details in the current quagmire involving the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the U.S. Congress, the Federal Housing Finance Agency, the U.S. Department of Treasury and the U.S. Court System.

Let’s first answer some questions… Are Fannie Mae and Freddie Mac private entities or government entities? Is the government-controlled conservatorship of those entities in place to revive or wind-down those entities?

These questions were answered in April 2012.

On April 30, 2012, the United States District Court for the District of Columbia led by United States District Judge Rosemary M. Collyer in Herron v. Fannie Mae ruled that FNMA is a private entity owned by shareholders. The court also ruled that FHFA, as conservator, was meant to be temporary and by its charter cannot act to dissolve or liquidate FNMA.

Caroline Herron vs. Fannie Mae, et al


Judge Collyer wrote:

  • “Congress empowered FHFA to act as conservator of Fannie Mae for the purpose of reorganizing…(and) the enabling statute expressly allows FHFA temporary but complete control over Fannie Mae, not permanent control.”
  • “OMB, Fiscal Year 2012; Analytical Perspectives, Budget of the U.S. Government…budget reflects Fannie Mae as a non-budgetary entity in keeping with its temporary status in conservatorship.”
  • “The complete control exercised by FHFA is authorized by statute; it is how conservatorship is accomplished. Because conservatorship is by nature temporary, the government has not acceded to permanent control over the entity and Fannie Mae remains a private corporation.”
  • “The purpose of the conservator…is to restore the entity to fiscal feasibility…”

Here is a critically important point in the ruling:

“Fannie Mae would be a federal actor if the FHFA conservatorship retained for the government permanent authority to appoint a majority of the corporation’s directors. Lebron, 513 U.S. at 400. To the contrary, the appointment of FHFA as conservator did not establish permanent government authority to control Fannie Mae. First, Ms. Herron insistes (sic) that there is no date certain when the conservatorship of Fannie Mae will end, and, therefore, she erroneously concludes that FHFA control over Fannie Mae must be permanent. In order to be a government actor under the Lebron framework, permanent government control is required.”

Again, US District Judge Collyer ruled on April 30, 2012 that “…the appointment of FHFA as conservator did not establish permanent government authority to control Fannie Mae” and “the purpose of the conservator…is to restore the entity to fiscal feasibility…”

However on August 17, 2012 less than four month after the US District Court ruled that Fannie Mae is a private company and that the conservatorship is not meant to be permanent, FHFA as conservator privately agreed with the Treasury Department to appropriate all current and future profits of Fannie Mae (and Freddie Mac) apparently in an effort designed to bankrupt these two private companies.

It’s interesting to consider if the August 17, 2012 deal was in place prior to Judge Collyer’s ruling, would Ms. Herron have prevailed in her case against the U.S. Government?  Likely so…

It’s also interesting to consider if the August 17, 2012 deal was intentionally postponed until the Herron trial concluded.

If conservatorship is “by nature temporary” (Judge Collyer) with the “goal of preserving and conserving the assets and property of Fannie Mae and Freddie Mac” (FHFA website), then why would FHFA decide to give away all of the profits of this “private company” (Judge Collyer) to the U.S. Government?

And why does the U.S. Treasury take credit for this action on its website:

“Treasury Department Announces Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac” as stated on the Treasury.gov website:


It seems like the Conservator is not in control of the situation. It seems like the Treasury Department is in complete and ultimate control of the fate of Fannie and Freddie.

“Further steps to wind down Fannie Mae and Freddie Mac?” What further steps? What wind down? There were no previous steps to wind down the entities before this August 17, 2012 closed-door deal. Congress, taxpayers, shareholders, etc. were all told up until this point that the entities were in conservatorship. This proves that publically the plan was to eventually set Fannie and Freddie free, while privately the FHFA/Treasury plan was to “wind down” the entities. Is this transparency? Ethical? Legal?

Which act of Congress decided to wind down and end Fannie Mae and Freddie Mac? What Executive Order signed by any President directed the elimination of Fannie and Freddie? None. Just a couple of government employees getting together to privately decide the fate of these two private companies.

Tim and Ed’s Excellent Adventure



Who exactly entered into this August 17, 2012 agreement? Tim Geithner, then Treasury Secretary, and Ed DeMarco, who at the time was serving only as acting Director of FHFA. Really!?! The Treasury Secretary had that level of power that he could enter into an agreement with a mere acting Director to render death sentences to Fannie and Freddie? No act of Congress; no Executive Order; no public debate… just two men deciding to eliminate important American institutions, one of which dates back to FDR and the New Deal. Sounds more like Tim and Ed’s Bogus Journey!

Housing and Economic Recovery Act of 2008 (HERA 2008)



HERA 2008 provided the authority, under the then-current conditions, to FHFA to act as conservator. That Act specifically mandated that FHFA not perform any action that would liquidate, wind down, or otherwise weaken Fannie and Freddie. The Act provided no authority for the Treasury Department to proceed with “further steps to expedite wind down of Fannie Mae and Freddie Mac.”

So, why hasn’t Congress done anything to stop this injustice? Given today’s Congress, that appears at best to be a rhetorical question.

The August 17, 2012 Geithner/DeMarco Agreement:

  • Made the Conservatorship permanent
  • Put the U.S. Treasury Department in complete control of these two companies
  • Put Fannie and Freddie on a path toward insolvency thus automatically triggering Receivership
  • Changed the status of Fannie and Freddie from private companies to government actors

According to HERA:

‘(4) MANDATORY RECEIVERSHIP. ‘‘(A) IN GENERAL. The Director shall appoint the Agency as receiver for a regulated entity if the Director determines, in writing, that—

‘‘(i) the assets of the regulated entity are, and during the preceding 60 calendar days have been, less than the obligations of the regulated entity to its creditors and others…”

So, it appears that Mr. Geithner and Mr. DeMarco intentions in the 8/17/12 Agreement (aka the Third Amendment or the Sweep Agreement) were to force Fannie Mae and Freddie Mac into Mandatory Receivership thus effectively “furthering steps to expedite wind down” thereby eliminating these two pillars of the American housing and financial system.

Did the Legislative Branch of the U.S. Government really intend to cede so much power into the hands of two government employees while banning the Judicial Branch from considering cases based on constitutionally and also sparring these two employees (and any other complicit party) from criminal or civil review? Did President Obama know about the actions of these two employees? He surely must have known, as he was their supervisor.

The problem with two federal employees deciding on August 17, 2012 to eliminate Fannie and Freddie was that Mr. Geithner and Mr. DeMarco failed to establish any entity or system to replace Fannie and Freddie. Change…and Hope! Sounds familiar…

The other problem with the August 17, 2012 Geithner/DeMarco deal (which makes the whole “Conservatorship” a sham which must violate SEC laws) is that Fannie Mae and Freddie Mac are effective and profitable. Not just profitable today, but profitable on August 17, 2012.

So, with Congress not holding the Executive Branch accountable, the owners of Fannie and Freddie took their case against the U.S. Government to court. Now justice will be served!

Not so fast… The U.S. Treasury Department lawyers asked the court to dismiss the cases stating, among other things, that the HERA 2008 law contained a provision that barred judicial review. Surely, the Legislative Branch does not have the ability to ban the Judicial Branch from reviewing its laws and reviewing the actions of the Executive Branch.

Well, according to the U.S. District Court for the District of Columbia presided by the Honorable Senior United States District Judge Royce C. Lamberth, Congress does have the ability to exclude the Judicial Branch from functioning as intended in HERA-related matters. On September 30, 2014 Judge Lamberth agreed with U.S. Treasury Department lawyers and summarily dismissed several lawsuits seeking justice in the illegal takeover of Fannie and Freddie (Perry, Fairholme, et al vs. U.S. Government). Case dismissed without discussion… Without discussion!

Is this what our Senators and Congressmen who voted for HERA intended? Did they really intend to exclude the entire Judicial Branch of government from even having the ability to rule on the intentional bankrupting of such important pillars of the country’s financial system?

HERA 2008:

‘‘(D) LIMITATION ON JUDICIAL REVIEW.—Except as otherwise provided in this subsection, no court shall have jurisdiction over—

‘‘(i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets or charter of any regulated entity for which the Agency has been appointed receiver; or

‘‘(ii) any claim relating to any act or omission of such regulated entity or the Agency as receiver.

But, that section barring judicial review clearly applies to the Agency (FHFA) “as receiver.” FHFA has never acted as receiver, only conservator.

Well, that being said, did the Senators and Congressmen who voted for the Housing and Economic Recovery Act of 2008 really intend to empower the Executive Branch, and more specifically two employees of the Executive Branch – Timothy Geithner and Edward DeMarco – with the enormous power to kill Fannie Mae and Freddie Mac? Two people!? Without discussion!?

HERA 2008:

‘‘(7) AGENCY NOT SUBJECT TO ANY OTHER FEDERAL AGENCY.—When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency.”

Attached are the voting records from the Senate and House on HERA 2008. Perhaps we should each ask our elected representatives if their vote for this law was intended to give such ultimate power to few individuals while precluding the judiciary from participation.

Senate Vote: 84 For – 12 Against – 4 No Vote


It is interesting that a few Senators abstained from voting – Barack Obama, Hillary Clinton, Elizabeth Dole and John McCain. Why no stand on this important issue…?

House Vote: 241 For – 172 Against – 20 No Vote


Points to consider:

  • HERA and Treasury stated that a bailout loan was necessary and that a conservatorship would return Fannie and Freddie into sound going concerns, yet conspired to not have any of the payments go toward loan repayment. All of the money is considered interest. Loan? Conservatorship? Conspiracy to violate an Act of Congress? Conspiracy to commit SEC violations by not being forthright as it applied to actively traded securities?
  • Treasury stated that Fannie and Freddie were the cause of the financial melt down in 2008 thus creating the need for their hostile take-over. However, Treasury after taking over FnF decided that the melt down was the result of major banks defrauding FnF. The banks settled and Treasury collected huge settlements on behalf of FnF, with the funds going right back to the Treasury as the August 17, 2012 agreement states Treasury gets all of FnF profits.
  • Treasury bailed out the Too Big to Fail banks under the Troubled Asset and Relief Program. As a part of this ordeal, Treasury forced the now Treasury-controlled FnF to purchase toxic loans from the troubled banks they were bailing out. And despite transferring these bad assets to FnF, both entities still returned to profitability by August 17, 2012. If FnF were not profitable on this date why would Mr. Geither direct Mr. DeMarco to siphon off profits that didn’t exist?
  • If the September 2008 Conservatorship is “by nature temporary” (Judge Collyer) why is there no discussion of ending Conservatorship (another rhetorical question…)
  • If FnF were profitable on August 17, 2012 (and are even more profitable today) why were they both forced onto a train that is headed to the gallows via station stops at Insolvency then Receivership and finally Annihilation?
  • Is it possible for someone to commute Fannie and Freddie’s August 17, 2012 wrongfully-convicted death sentence?

How is business today at Fannie and Freddie:

Fannie Mae Reports Net Income of $3.9 Billion and Comprehensive Income of $4.0 Billion for Third Quarter 2014: November 6, 2014


“This was another solid quarter, with the company reporting strong financial results and continuing to provide much needed liquidity to the market,” said Timothy J. Mayopoulos, president and chief executive officer. “We continue to build a strong book of business based on appropriate standards. We are committed to being our customers’ most valued business partner and delivering the products, services, and tools our customers need to serve the entire market confidently, efficiently, and profitably.”

“Fannie Mae expects to pay $4.0 billion in dividends to Treasury in December 2014. With the December dividend payment, Fannie Mae will have paid a total of $134.5 billion in dividends to Treasury in comparison to $116.1 billion in draw requests since 2008. Dividend payments do not reduce prior Treasury draws.”

What would FDR think of this New (Gaithner/DeMarco) Deal? All payments are considered interest…



“It was another solid quarter for Freddie Mac, our twelfth straight of profitability,” said Freddie Mac CEO Donald H. Layton. “The fundamentals of our business continued to improve… Our work to become a more competitive company is bearing fruit in increased customer satisfaction and market share between the GSEs. We also strongly delivered on our mission to be one of the leading sources of liquidity in the market, funding approximately one in four home loans and nearly 214,000 units of rental housing in the first nine months of 2014. At the same time, we are working with FHFA and the industry to strengthen and modernize the housing finance system,” Layton added. “We’re doing this by upgrading critical infrastructure, providing our customers with greater certainty through, as one example, refined representation and warranty terms, and also reducing taxpayer exposure through credit risk sharing transactions and the efficient liquidation of several types of legacy assets. These innovations will benefit millions of homebuyers and renters as well as taxpayers today and in the future.”

Looks like Mr. Mayopoulos and Mr. Layton are trying to get off the Annihilation-bound train.

Care to comment Director Watt?


“During my tenure as Director of FHFA, we have made substantial progress by working together and I believe we can sustain this progress.  We have started to move mortgage finance back to a responsible state of normalcy – one that encourages responsible lending to creditworthy borrowers while maintaining safety and soundness of the Enterprises… This will result in a housing market that is not only better for borrowers, but also better for the Enterprises and lenders and beneficial to our country.”

“As I have consistently done since becoming Director of FHFA, I want to emphasize that getting input and feedback from stakeholders is a crucial part of FHFA’s policymaking process. So give us your input, not only on our FHLB Proposed Rule, but on other policy initiatives and decisions we are evaluating.”

Hmmm…oh, I have one…Stop the Train.

How about repeal the Gaithner/Demarco Agreement? Or ending the Conservatorship? Or at least communicate exactly how the conservatorship could be ended?

And does Secretary Lew have a comment?

CNBC interview with Treasury Secretary Jack Lew onWednesday, July 16, 2014.


“JIM CRAMER: Mr. Secretary, on a very positive story that I question why you don’t talk about it, our treasury refunding. You’ve got Fannie Mae paying you a $122 billion. Their obligation was for $160 billion.

Can this continue, or are you going to make it so that, or do you recommend, because I know it’s Congressional, that the preferred be made good and even the common stock be made good? Because Treasury’s gotten all its money back.

JACOB LEW: You know, Jim, if you look at the most recent exposure report, stress test reports on the GSEs, on Fannie Mae and Freddie Mac, it shows that in a crisis, that the exposure would still be to the taxpayer, and it would still vastly outweigh what current profits are. I think as long as U.S. taxpayers are on the hook, it is appropriate for us to stay in the structure of conservatorship that we’re in. We need to get on with financial reform, we need to have a clear plan for future that circumscribes the taxpayers’ exposure in a very limited way. And the sooner we do that, the better.”

Agreed…the sooner the better. So, the train is not heading toward Annihilationville?

Would it not make sense to repeal the loan shark GD Agreement that implemented usury / predatory lending practices and recognize that the payments made by Fannie and Freddie should be applied to the principal loan amounts? Then, allow Fannie and Freddie to recapitalize with their profits?

Or, Secretary Lew, are you in agreement with Gaithner/DeMarco? Staying “in the structure of conservatorship” under the terms of Gaithner/DeMarco will never lead to a release of the conservatorship.

Mr. Lew, it’s noble to protect U.S. taxpayers. I am a U.S. taxpayer, you’re a taxpayer, we’re all taxpayers. It’s also noble to protect the pension funds of U.S. teachers, U.S. policemen and U.S. firefighters who are the owners of Fannie and Freddie. And they want their companies back.

Is there a conspiracy in play? Conservatorship and Gaithner/DeMarco cannot co-exist.

HERA 2008

‘‘(B) OPERATE THE REGULATED ENTITY.—The Agency may, as conservator…preserve and conserve the assets and property of the regulated entity”

Was the government takeover of the two private companies by FHFA/Treasury necessary in the first place?



According to the Financial Crisis Inquiry report the “…conservatorship was not a foregone conclusion. Paulson, Lockhart, and Bernanke met with Mudd, Syron, and their boards to persuade them to cede control. Essentially the GSEs faced a Hobson’s choice: take the horse offered or none at all. “They had to voluntarily agree to a consent agreement,” Lockhart told the FCIC. The alternative, a hostile action, invited trouble and “nasty lawsuits,” he noted. “So we made a . . . very strong case so the board of directors did not have a choice.” Paulson reminded the GSEs that he had authority to inject capital, but he would not do so unless they were in conservatorship. Mudd was “stunned and angry,” according to Paulson. Tom Lund, who ran Fannie Mae’s single-family business, told the FCIC that conservatorship came as a surprise to everyone. Levin told the FCIC that he never saw a government seizure coming. He never imagined, he said, that Fannie Mae was or might become insolvent. Interviewed in 2010, Mudd told the FCIC: “I did not think in any way it was fair for the government to have been in a position of being in the chorus for the company to add capital, and then to inject itself in the capital structure.”

HERA 2008

‘‘(6) DIRECTORS NOT LIABLE FOR ACQUIESCING IN APPOINTMENT OF CONSERVATOR OR RECEIVER.—The members of the board of directors of a regulated entity shall not be liable to the shareholders or creditors of the regulated entity for acquiescing in or consenting in good faith to the appointment of the Agency as conservator or receiver for that regulated entity.”

Should “consenting in good faith” be interpreted as not being coerced, intimidated or agreeing under duress?

“(Fannie Mae CEO Daniel) Mudd and (Freddie Mac CEO Richard) Syron said their companies could weather the downturn, but recently the government, reviewing the companies’ books, disagreed. Last weekend, (FHFA Director) Lockhart and Treasury Secretary Henry M. Paulson Jr. seized Fannie Mae and Freddie Mac and named new chief executives.”


“The first sound they’ll hear is their heads hitting the floor,” Henry Paulson.


“Do they know it’s coming, Hank?” President Bush asked me. “Mr. President,” I said, “we’re going to move quickly and take them by surprise. The first sound they’ll hear is their heads hitting the floor.”

It was Thursday morning, September 4, 2008, and we were in the Oval Office of the White House discussing the fate of Fannie Mae and Freddie Mac…I had proposed that we seize control of the companies, fire their bosses…I’m a straightforward person. I like to be direct with people. But I knew that we had to ambush Fannie and Freddie.”

From the movie A Few Good Men:

“Col. Jessup: You can’t handle the truth!

Lt. Kaffe: Colonel, did you order the Code Red.

Col. Jessup: You’re God Damn Right I Did!!!”

Federal Housing Finance Agency Office of the Inspector General FAQs


How were the Federal Housing Finance Agency conservatorships established?

Pursuant to authority granted under Housing and Economic Recovery Act and the Safety and Soundness Act, on September 6, 2008, the Boards of Fannie Mae and Freddie Mac both assented to the order of Federal Housing Finance Agency Director Lockhart appointing the Federal Housing Finance Agency as conservator of Fannie Mae and Freddie Mac.

Under what conditions could a conservatorship be instituted?

The Housing and Economic Recovery Act prescribes that the director may appoint a conservator (or receiver) in cases of insolvency, undercapitalization, operating in an unsafe or unsound condition, concealment of books and records to regulators, inability to pay obligations or meet the demands of creditors, violations of law, consent of the Board of Directors, and others.

Under the Housing and Economic Recovery Act, the Director must place the entity under receivership if the entity is insolvent for the preceding 60 days, or has not paid its obligations for the preceding 60 days.

When did the Federal Housing Finance Agency become conservator of Fannie Mae and Freddie Mac, and what does it mean to be conservator?

On September 6, 2008, weeks after enactment of the Housing and Economic Recovery Act, Fannie Mae and Freddie Mac were placed into conservatorships overseen by the Federal Housing Finance Agency. As conservator, the Federal Housing Finance Agency assumed all the powers of the shareholders, directors, and officers, with the goal of preserving and conserving the assets and property of Fannie Mae and Freddie Mac.

The Fifth Amendment of the U.S. Constitution states:

“No person shall…be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

The United States District Court for the District of Columbia ruled by United States District Judge Rosemary M. Collyer in Herron v. Fannie Mae decided that Fannie Mae (and thus Freddie Mac) is a private company and therefore its profits are considered private property.

The August 17, 2012 agreement is a violation of the U.S. Constitution as it deprives US citizens, without due process of law, of their private property without just compensation.

So, the US District Court for the District of Columbia is mixed in its interpretation of HERA regarding barring judicial review. Judge Collyer allowed a case to proceed, while Judge Lamberth summarily dismissed several cases which then led to an additional related case to be withdrawn in his court as he would have summarily dismissed that case, too (Pershing Square vs. U.S. Government).

Now all eyes are Margaret Sweeney…Honorable Judge Margaret M. Sweeney of the United States Court of Federal Claims. Judge Sweeney is presiding over similar lawsuits, which she is allowing to continue, and has yet to find that HERA prohibits her court from allowing these proceedings (Fairholme et at).

Also, the U.S. District Court for the Southern District of Iowa has a case in its court (Continental Western Insurance Company).

The practice of Congress passing laws that intentionally bar Courts from both constitutional review of said laws and from reviewing the actions resulting from those laws should scare, if not incense, every American.

Perhaps not every American cares about Fannie Mae or Freddie Mac. Perhaps the media has no interest in reporting on these fundamental issues involved here.

However, these issues are about the checks and balances of our three-branch government. The issues are about the U.S. government taking over private companies and not being forthright about it. It’s about the Government taking private property without just compensation. It’s about honesty, integrity, morality, civility… At the risk of sounding Pollyannaish, it’s about bringing back yesterday’s America.

If we don’t care about this unconstitutional act, why should we care about the next one? If we’ve caught the government in a dishonest act and lies, why not do something about it?

Or have we given up Hope for America?

We need to be like Lieutenant Kaffe (Tom Cruise) who bravely stood up against Colonel Jessup (Jack Nicholson) in the movie A Few Good Men. Lt. Kaffe uncovered the facts, battled the establishment and won! The U.S. Government and the Court system put up a formidable fight…but the truth came out and the battle was won…

No, we should not give up on America!

Congress should find the US Department of the Treasury and the Federal Housing Finance Agency in Contempt of Congress for their August 17, 2012 closed-door, back office GD agreement…and anyone else in Government that had or should have had prior knowledge of this deal…

The U.S. Supreme Court should rule that Congress is in Contempt of Court for opposing the entire authority of the Judicial Branch as a part of their HERA 2008 act as evidenced in U.S. District Court for the District of Columbia presided by the Honorable Senior United States District Judge Royce C. Lamberth on September 30, 2014 in the Perry and Fairholme vs. U.S. Government cases. The Senior US District Judge Lamberth’s ruling affirmed that the legislative branch successfully barred the judicial branch from reviewing the law and the actions by those supposedly following the law. If the lower court’s decision was correct, then the higher Supreme Court should act post-haste to restore faith in our checks-and-balances three-branch system.

One last passage from A Few Good Men:

“Col. Jessep: What the hell is this?

Capt. Ross: Colonel Jessep, you have the right to remain silent; Any statement you make may be used against you in a trial by court-martial or in other judicial or administrative proceedings. You have the right to consult with a lawyer prior any further questions. This lawyer may be a civilian lawyer retained by you at your own expense…

Col. Jessep: I’m being charged with a crime? Is that what this is? I’m being charged with a crime? This is funny. That’s what this is…

[Turning to Kaffee and lunging at him. But the MP’s restrain Colonel Jessep]

Col. Jessep: … I’m gonna rip the eyes out of your head and puke into your dead skull, you messed with the wrong marine!

Capt. Ross: Colonel Jessep, do you understand these rights as I have just read them to you?


Col. Jessep: You friggin’ people. You have no idea how to defend the nation. All you did was weaken a country today, Kaffee. That’s all you did. You put people’s lives in danger. Sweet dreams, son.

Kaffee: Don’t call me son. I’m a lawyer, and an officer in the United States Navy, and you’re under arrest, you son of a bitch.

[Glares at Jessep]

Kaffee: The witness is excused.

Keep up the fight!

And for your feel-good, reading pleasure, the Treasury press release:


“Treasury Department Announces Further Steps to Expedite Wind Down of Fannie Mae and Freddie Mac


Modifications to Preferred Stock Purchase Agreements Will Make Sure That Every Dollar of Earnings Fannie Mae and Freddie Mac Generate Will Benefit Taxpayers

Announcement Will Support the Continued Flow of Mortgage Credit during a Responsible Transition to a Reformed Housing Finance Market

WASHINGTON — The U.S. Department of the Treasury today announced a set of modifications to the Preferred Stock Purchase Agreements (PSPAs) between the Treasury Department and the Federal Housing Finance Agency (FHFA) as conservator of Fannie Mae and Freddie Mac (the Government Sponsored Enterprises or GSEs) that will help expedite the wind down of Fannie Mae and Freddie Mac, make sure that every dollar of earnings each firm generates is used to benefit taxpayers, and support the continued flow of mortgage credit during a responsible transition to a reformed housing finance market.

“With today’s announcement, we are taking the next step toward responsibly winding down Fannie Mae and Freddie Mac, while continuing to support the necessary process of repair and recovery in the housing market,” said Michael Stegman, Counselor to the Secretary of the Treasury for Housing Finance Policy. “As we continue to work toward bi-partisan housing finance reform, we are committed to putting in place measures right now that support continued access to mortgage credit for American families, promote a responsible transition, and protect taxpayer interests.”

The modifications to the PSPAs announced today are consistent with FHFA’s strategic plan for the conservatorship of Fannie Mae and Freddie Mac that it released in February 2012. The modifications include the following key components:

Accelerated Wind Down of the Retained Mortgage Investment Portfolios at Fannie Mae and Freddie Mac

The agreements require an accelerated reduction of Fannie Mae and Freddie Mac’s investment portfolios. Those portfolios will now be wound down at an annual rate of 15 percent – an increase from the 10 percent annual reduction required in the previous agreements. As a result of this change, the GSEs’ investment portfolios must be reduced to the $250 billion target set in the previous agreements four years earlier than previously scheduled.

Annual Taxpayer Protection Plan

To support a thoughtfully managed wind down, the agreements require that on an annual basis, each GSE will – under the direction of their conservator, the Federal Housing Finance Agency – submit a plan to Treasury on its actions to reduce taxpayer exposure to mortgage credit risk for both its guarantee book of business and retained investment portfolio.

Full Income Sweep of All Future Fannie Mae and Freddie Mac Earnings to Benefit Taxpayers for Their Investment

The agreements will replace the 10 percent dividend payments made to Treasury on its preferred stock investments in Fannie Mae and Freddie Mac with a quarterly sweep of every dollar of profit that each firm earns going forward.

This will help achieve several important objectives, including:

  • Making sure that every dollar of earnings that Fannie Mae and Freddie Mac generate will be used to benefit taxpayers for their investment in those firms.
  • Ending the circular practice of the Treasury advancing funds to the GSEs simply to pay dividends back to Treasury.
  • Acting upon the commitment made in the Administration’s 2011 White Paper that the GSEs will be wound down and will not be allowed to retain profits, rebuild capital, and return to the market in their prior form.
  • Supporting the continued flow of mortgage credit by providing borrowers, market participants, and taxpayers with additional confidence in the ability of the GSEs to meet their commitments while operating under conservatorship.
  • Providing greater market certainty regarding the financial strength of the GSEs.”

Colonel Jessup defending the Nation!

26 thoughts on ““You Can’t Handle The Truth!”

  1. If you don’t mind some advice I think you could have edited this into a couple articles. There is a lot here and a big read for most folks. Some very good points all around. Love the abundance of reference materials and links. Thank you for taking the time to out this together.


    • If break the whole truth in to smaller articles, the real impact will be lost.
      Best idea would be to structure the whole article like a filing in a court,
      in layman’s words.


  2. FnF and AIG were victims of securities and insurance fraud.
    This is very clear from the Gov initiated criminal prosecutions of FIs,
    and settlement worth hundreds of billions of dollars in favor of FnF.
    The same is true for AIG except that bailout agreement prevented AIG from suing these FIs for recovery.

    2008 Crisis would not have happened if not for securities and insurance fraud by both FDIC/NON-FDIC FIs.
    However FnF and AIG have never been accused of any fraud.

    Instead of helping FnF and AIG (the victims of fraud), these Bureaucrats punished FnF and AIG with punitive 10% to 14% interest rates and asking for 80% equity for free. Then these Bureaucrats appointed person/s of their choice to control FnF/AIG so that truth will never become public. They also immediately gagged FnF so that no truth will reach public.

    In contrast FDIC/NON-FDIC FIs who victimimzed FnF and AIG were awarded with generous loan terms and guarantees.

    Main stream media fully co-operated and became a party to spread false information and painted FnF and AIG as villains of 2008 crisis.

    If FnF were to be liquidated as per the wishes of some hired guns / experts it would have created biggest financial crisis and also would have buried the truth forever.

    It is amazing that despite vast and widespread designs to finish off FnF/AIG, these institutions have made a big come back and have become highly profitable and that too in just 3 to 4 years. Looking back, can anybody say FnF business was faulty or is it character flaw in the people who caused 2008 financial crisis and aftermath handling?


  3. Excellent article. You’ve pretty much nailed it. I believe you have one more 2012 vs 2014 mistake though.

    Please attempt to get this published more widely. Most of the major news outlets appear to be incompetent in this area. The WSJ needs particular help if they are ever to be taken seriously again.


  4. Fanofred are you done scrubbing? I want to send this out . I posted it on Ihub great reception. You might want to author your piece. otherwise it will go as anonymous. It does appear you spent a lot of time on this work, I appreciate it, and consider this one of the best works to date on FnF


    • Hey Rocco

      I think I fixed all the date issues, so I am done editing unless anyone identifies other issues. Thanks for posting on IHud…I see that it is getting good hits. Others are re-posting on various sites and the piece seems to be generating attention. I had a couple sleepless nights thinking about FnF…so, I grabbed my computer and did something about it…! It’s intentionally long so that potential news agencies will discover there are a lot of interesting elements to the story. I’ll post a condensed version later in the week.

      I intend to remain anonymous. I am only interested in the debate being centered on the right issues and that the truth be told.

      Please send this piece to anyone you think would be interested.

      Thanks for your comments. Cheers!


  5. Signed it, also sent you letter to all the members of the banking committee (22) had a problem with Heidi Heitkamp. her site will only accept 5k characters or less


  6. Pingback: Happy Labor Day America! | thetruthaboutfannieandfreddie

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