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DCI – Bailout

Posted by Artem Kotenko

Our video for DCI regarding the Treasury bailout of Fannie Mae and Freddie Mac, and the resulting lawsuit which followed.

Running time: 2:17

Script: As the country was being plunged into financial crisis in 2008, the Treasury Department provided Fannie Mae and Freddie Mac with $187 billion in emergency funds. In exchange, Treasury was given preferred stock; paying a 10% quarterly dividend and warrants for 79% of the company’s common stock. Within a few years, Fannie and Freddie became profitable again, and shortly after in 2012, individuals at Treasury unilaterally changed the terms of the agreement to be even more in their favor – granting themselves 100% of Fannie and Freddie’s quarterly profits, and leaving the company’s shareholders with nothing. Since the enactment of this net worth sweep, Fannie and Freddie have been wildly profitable, and have more than compensated for what they were given. To date, Fannie and Freddie have paid Treasury $246 billion; that’s nearly $60 billion more than the original loan. But the net worth sweep continues with no end in sight. In fact, Treasury expects to collect close to $400 billion by 2027. Not surprisingly, shareholders have sued the government over this unfair agreement, and in one case, a judge has awarded Sweeping Discovery to the plaintiffs. But rather than turning over evidence, the Treasury is stonewalling the court. Government lawyers are refusing to share some 180,000 pages of documents, including items as mundane as emails or daily news clips, under a claim of Executive Privilege. Executive Privilege is invoked very infrequently, and only in extreme cases that threaten national security, or in criminal proceedings. The government argues that these documents must be kept secret to protect the economy. But how can email exchanges and press clippings from seven years ago threaten America’s financial stability today? That’s an overreaction at best, and at worst, an abuse of power. If the government can draw the curtains on this, it can draw the curtains on anything it does. What is the government hiding? Find out more at www.investorsunite.org