WASHINGTON, D.C. – Infowars.com has released below the first of three never-before seen documents the Obama Treasury Department circulated internally in 2010 and 2011 as the plan to save Obamacare by bankrupting Fannie Mae and Freddy Mac developed.
The plan was apparently under the guidance of Valerie Jarrett, Obama’s special adviser within the White House, Treasury Secretary Timothy Geithner and Austan Goolsbee, head of the Council of Economic Advisors.
Part 1 of the First Document
This article focuses on the first of the three Treasury Documents revealing the Obama administration’s plan to “wind down” Freddie and Fannie – a euphemism thinly disguising its startling conclusion that Fannie Mae and Freddie Mac needed to be shut down to fund Obamacare, despite the historic role the two mortgage giant Government Sponsored Entities, GSEs, have played in making real the middle-class American dream of home ownership.
Engineering the largest theft of investor dividends in U.S. corporate history, the Obama administration robbed their mortgage profits, thereby bankrupting Fannie and Freddie to save Obamacare, and executed a secret plan to throw middle-class mortgage borrowers into the grasp of Wall Street and banks “too big to fail,” despite knowing the consequences would likely include the demise of the 30-year mortgage – a Depression Era innovation of the Federal Housing Administration (FHA) that reduced monthly mortgages so middle-income Americans could afford to buy homes.
Beginning on Feb. 27, Infowars.com began publishing a series of articles explaining how on Aug. 17, 2012, the Obama administration implemented a scheme widely known as the “Net Worth Sweep,” designed by Obama Treasury Department officials to steal billions from Fannie Mae and Freddie Mac to keep Obamacare from going bankrupt.
What this first Treasury document reveals, being made public today by Infowars.com for the first time, is that top Obama Treasury officials engineered the “Net Worth Swap” as the strategy designed to “wind down” Fannie and Freddie, so the GSEs ultimately could be closed altogether.
The Obama administration implemented this strategy knowing that this would lead to fewer mortgages for the middle-class in the future, depriving the market power of public financing, while concentrating the mortgage market into the grasp of Wall Street and big global banks – the “too big to fail” the Democrats relied on as top financial donors to Hillary Clinton’s 2016 presidential campaign.
Put simply, Obama Treasury officials traded away affordable housing for the middle-class to give them Obamacare, while transferring the U.S. mortgage market from Fannie and Freddie to Wall Street and big globally powerful U.S. banks.
The $260 billion diverted to the U.S. Treasury under the “Net Worth Swap” is perhaps the largest theft in U.S. financial history of stock dividend payments from private investors – the legal and rightful recipients of those dividend payments.
Part 2 of the First Document
“In 2013 alone, Treasury swept over $130 billion dollars in GSE profits in the form of dividends via the Net Worth Sweep,” wrote financial expert Joshua Rosner. “To highlight the scale of these dollars, these are the same amounts recently at issue in a lawsuit over the cost of 10-years of ‘Obamacare’ reimbursements to insurers.”
On Oct. 4, 2016, Judge Margaret M. Sweeney of the U.S. Court of Federal Claims in Washington, D.C., gave her first order demanding the release of some of the documents that the government sought to withhold – documents the New York Times reported reached “the highest levels of the Obama administration.”
In analyzing the 53 documents released by Judge Sweeney, Rosner concluded a group of Obama White House officials, Treasury officials and Federal Housing Finance Agency (FHFA) officials were involved in “a brazen attempt” to violate the spirt and “perhaps the letter of the law,” passed by Congress and signed by President Obama in the Housing and Economic Recovery Act of 2008 (HERA).
Rosner pointed out HERA law gave FIFA, the newly created Fannie and Freddie regulator, the authority to “establish criteria governing the portfolio holdings of the enterprises, to ensure that the holdings are backed by sufficient capital and consistent with the mission and the safe and sound operations of the enterprises” and to “establish risk-based capital requirements for the enterprises to ensure that the enterprises operate in a safe and sound manner, maintaining sufficient capital and reserves to support the risks that arise in the operations and management of the enterprises.”
Congress, in passing HERA, never anticipated the Obama administration would take over Fannie and Freddie and strip the agencies with all profits to the Treasury general fund – a move that left private and institutional shareholders in the cold.
By engineering with the FIFA and the Department of Treasury an amendment to the Senior Preferred Stock Purchase Agreements that created the “Net Worth Sweep,” on Aug. 17, 2012, the Obama administration allowed the U.S. Treasury to grab ALL Fannie and Freddie profits – regardless of how large Fannie and Freddie’s earnings might be.
“Rather than retaining earnings and building capital in accordance with the goal of rehabilitation (as required in a conservatorship pursuant to HERA, and as was demanded of every other financial institution after the crisis), the Third Amendment ensured that the GSEs could never rebuild capital nor – no matter how much money they returned to the Treasury – be allowed to ever repay the government,” Rosner pointed out.
“These actions clearly violate the most basic requirement of HERA that instruct the Director of FHFA ‘to oversee the prudential operations of each regulated entity and to ensure that… each regulated entity operates in a safe and sound manner, including maintenance of adequate capital and internal controls,’” Rosner concluded.
Rosner further concluded the newly-released documents also prove that the actions of these former senior Obama administration “were premediated and defended with false statements which falsely articulated there was an imminent risk the GSEs would need more financial assistance.”
The first document is a memorandum prepared for Treasury Secretary Timothy Geithner by Jeffrey A. Goldstein, Undersecretary for Domestic Finance, dated Jan. 6, 2011 – a year and eight months before the “Net Worth Swap;” it was clear Treasury implemented the “Net Worth Swap” knowing it would be impossible for Fannie or Freddie ever to repay Treasury and that confiscating all Fannie and Freddie profits would weaken the capital structure of the GSEs to the point both would fail in the event of a future economic downturn.
As stated explicitly in this memorandum, Treasury’s goal was to “wind down the GSEs, privatize the [mortgage market] and reduce taxpayer risk.”
As part of the Obama administration’s plan to “wind down” the GSEs, the Treasury memo anticipated abolishing the federal government charters of Fannie and Freddie, such that the purchasing of mortgages from mortgage originators would be transferred to “private securitization, covered bonds, FHLB advances, and bank balance sheets,” in other words to the control of big banks and Wall Street.
Remember that Freddie and Fannie were created as GSEs to purchase qualified mortgage loans for mortgage originators – historically to savings and loan associations (before the “S&L crisis” of the 1980s and 1990s resulted in the creation of the Resolution Trust Company and the closure of savings and loan associations across the United States.)
By purchasing mortgage loans from mortgage origination S&L associations, Fannie and Freddie used taxpayer funds to provide the liquidity S&Ls needed to continue making new mortgage loans.
The Treasury memo contemplated obtaining legislation that would transform Fannie and Freddie into “a government catastrophic risk insurer” – a mission fundamentally different from the historical mission the GSEs have served in providing liquidity to a middle-class mortgage market.
An attachment to the memo identified the business and government attendees to a meeting closed to the press held to discuss “Housing Finance Reform” a year earlier – on Jan. 20, 2010 – with attendees including former Federal Reserve Chairman Paul Volker and Penny Pritzker, another top Hillary Clinton donor, who attended the meeting as the chairperson of the Pritzker Realty Group.
The agenda of the 2010 meeting began with a lead topic, “Target and Limit Any Government Guarantees for Mortgages” that included a sub-topic, “Avoid recreating hybrid private-public institutions like Fannie and Freddie.”
Remember, historically Fannie and Freddie had been so profitable that Congress opted to open the GSEs to private investors, giving them the opportunity to purchase Fannie and Freddie common stock.
What appears clear is that in the absence of the Aug. 17, 2012 amendment to the Senior Preferred Stock Purchase Agreements defining the Treasury’s investment of $187.5 billion into Fannie and Freddie, the GSEs were profitable enough by 2013 that the $130 billion in Fannie and Freddie profits confiscated by the Treasury under the “Net Worth Sweep” would have gone a long way to retiring the principle and meeting the dividend obligations of the Fannie and Freddie preferred stock the Treasury had purchased.
The memo noted that the secret meeting including Volker and Pritzker was to be held in the U.S. Treasury in Secretary Geithner’s “Small Conference Room,” starting at 10:45 am, scheduled to end an hour later, at 11:45 am, on Jan. 20, 2010 – to be followed by a follow up meeting to be held in the White House Oval Office with President Barack Obama, scheduled for Dec. 1, 2010.
The agenda of the 2010 secret Treasury meeting made clear the only federal guarantee the Treasury planned to issue after Fannie and Freddie were “wound down” would be to low-income purchasers.
The agenda revealed that Treasury understood that by privatizing the mortgage market by requiring mortgage originators to sell their mortgages to Wall Street firms and big banks seeking to package these mortgages into securities to be sold to investors, mortgages to the middle class would inevitably become more expensive.
The memo redefined the U.S. housing policy since FDR that had valued “home ownership” as a cornerstone of the American dream, to a new Obama administration housing policy that would “ensure Americans are ‘well-housed’ rather than simply encouraging homeownership per se.”
The memo for the secret 2010 Treasury meeting proclaimed: “Adequate and affordable housing is a basic policy objective, so ensuring economic rental opportunities is as important as encouraging home ownership.”
As we shall see in the next article, by destroying Fannie and Freddie, and eliminating the 30-year fixed mortgage, Obama was willing to abandon the government subsidies that since the Great Depression have allowed the middle class to buy homes in which to raise families.
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