Senior Preferred Stock Purchase Agreement

In addition to these rescues, the Treasury and the Federal Reserve purchased more than $3 trillion of MBS and GSE bonds to fend off further losses that would have required more bailouts. From September 2008 to December 2009, the Treasury purchased more than $220 billion from GSE MBSS. REF In November 2008, the Federal Reserve announced its intention to purchase billions of dollars of GSE and MBSs bonds over an extended period of time. REF The Fed then purchased $134.5 billion of GSE bonds and more than $1 trillion from GSE-MBS between December 2008 and March 2010, and an additional $2.2 trillion in GSE-MBS from October 2011 to June 2019. , and the “exit conservation” is wrong on so many levels. Finally, the value of the warrants of the subject, which provide for the right to acquire just under 80% of each stock of common shares of the GSE, should be fully recognized. The government would be free to sell the common shares, as it sees fit, in order to obtain the maximum value of the taxpayer. To justify the cancellation of the liquidation preference, some proponents claim that the preferred shares of the Ministry of Finance have been “repaid with interest”. REF The $306 billion in dividends that GSEs paid to the Treasury exceed $191.5 billion in Cash Injections from the Treasury of more than $116 billion. However, as noted above, this argument is based solely on cash flow accounting and ignores all the economic risks associated with the bailout, an error that underestimates the actual costs of about $200 billion.

REF And of course, the return on an investment (preferential dividends) is different from the investment itself (credit-related). This is the $123 billion in additional dividends paid since the beginning of 2013 (the effective date of the net worth sweep) in the third quarter (Q3) of 2019 compared to the original 10% fixed dividend formula. The task of cleaning up at least $200 billion for the exit of the conservatory is terrifying, but the real financial hurdle is about double, as the liquidation preference of nearly $200 billion under existing tax bailouts is almost twice as high. Despite recent changes to the PSPA, GSEs must provide most of the capital needed to private investors instead of using the retained profits to contribute to the total contribution. REF Even if the obligations arising from the existing agreements are ignored, such an increase in capital on the stock market would overshadow the largest IPOs in history, like Alibaba`s $25 billion in 2014, Facebooks $16 billion in 2012, $18.1 billion from General Motors in 2010 (after bankruptcy in 2009) and Ubers $9 billion in 2019 when the GS were transferred into the contract in September 2008. they were saved at the same time by a series of massive capital injections. Once again, the original preferred shareholders or their successors were not entitled to this bailout.

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