Exhibit 99.3
U.S. Treasury Department Office of Public Affairs
Fact Sheet:
Treasury Senior Preferred Stock Purchase Agreement
Fannie Mae and Freddie Mac debt and mortgage backed securities outstanding today amount to about $5
trillion, and are held by central banks and investors around the world. Investors have purchased
securities of these government sponsored enterprises in part because the ambiguities in their
Congressional charters created a perception of government backing. These ambiguities fostered
enormous growth in GSE debt outstanding, and the breadth of these holdings pose a systemic risk to
our financial system. Because the U.S. government created these ambiguities, we have a responsibility
to both avert and ultimately address the systemic risk now posed by the scale and breadth of the
holdings of GSE debt and mortgage backed securities.
To address our responsibility to support GSE debt and mortgage backed securities holders, Treasury
entered into a Senior Preferred Stock Purchase Agreement with each GSE which ensures that each
enterprise maintains a positive net worth. This measure adds to market stability by providing
additional security to GSE debt holders — senior and subordinated— and adds to mortgage affordability by
providing additional confidence to investors in GSE mortgage-backed securities. This commitment
also eliminates any mandatory triggering of receivership.
These agreements are the most effective means of averting systemic risk and contain terms and
conditions to protect the taxpayer. They are more efficient than a one-time equity injection, in
that Treasury will use them only as needed and on terms that the Treasury deems appropriate.
These agreements provide significant protections for the taxpayer, in the form of senior preferred
stock with a liquidation preference, an upfront $1 billion issuance of senior preferred stock with a 10%
coupon from each GSE, quarterly dividend payments, warrants representing an ownership stake of 79.9% in
each GSE going forward, and a quarterly fee starting in 2010.
Terms of the Agreements:
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The agreements are contracts between the Department of the Treasury and each GSE. They are
indefinite in duration and have a capacity of $100 billion each, an amount chosen to
demonstrate a strong commitment to the GSEs’ creditors and mortgage backed security holders.
This number is unrelated to the Treasury’s analysis of the current financial conditions of the
GSEs. |
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If the Federal Housing Finance Agency determines that a GSE’s liabilities have exceeded its
assets under generally accepted accounting principles, Treasury will contribute cash capital
to the GSE in an amount equal to the difference between liabilities and assets. An amount
equal to |
