Fannie Mae 2009 Annual Report Download - page 32

securities contract, commodity contract, forward contract, repurchase agreement, swap agreement and any
similar agreement that FHFA determines by regulation, resolution or order to be a qualified financial contract.
Avoidance of Fraudulent Transfers
The conservator may avoid, or refuse to recognize, a transfer of any property interest of Fannie Mae or of any
of our debtors, and also may avoid any obligation incurred by Fannie Mae or by any debtor of Fannie Mae, if
the transfer or obligation was made (1) within five years of September 6, 2008, and (2) with the intent to
hinder, delay, or defraud Fannie Mae, FHFA, the conservator or, in the case of a transfer in connection with a
qualified financial contract, our creditors. To the extent a transfer is avoided, the conservator may recover, for
our benefit, the property or, by court order, the value of that property from the initial or subsequent transferee,
unless the transfer was made for value and in good faith. These rights are superior to any rights of a trustee or
any other party, other than a federal agency, under the U.S. bankruptcy code.
Management of the Company under Conservatorship
Upon our entry into conservatorship in September 2008, FHFA, as conservator, succeeded to the powers of our
officers and directors. The conservator subsequently reconstituted our Board of Directors and delegated to our
management and Board of Directors the authority to conduct our day-to-day operations, subject to the
direction of the conservator. The conservator retains the authority to withdraw its delegations to the Board and
to management at any time.
Our directors serve on behalf of the conservator and exercise their authority as directed by and with the
approval, where required, of the conservator. Our directors do not have any duties to any person or entity
except to the conservator. Accordingly, our directors are not obligated to consider the interests of the company,
the holders of our equity or debt securities or the holders of Fannie Mae MBS unless specifically directed to
do so by the conservator. In addition, the conservator directed the Board to consult with and obtain the
approval of the conservator before taking action in specified areas, as described in “Directors, Executive
Officers and Corporate Governance—Corporate Governance—Conservatorship and Delegation of Authority to
Board of Directors.”
Effect of Conservatorship on Shareholders
The conservatorship has had the following adverse effects on our common and preferred shareholders:
• the rights of the shareholders are suspended during the conservatorship. Accordingly, our common
shareholders do not have the ability to elect directors or to vote on other matters during the
conservatorship unless the conservator delegates this authority to them;
• the conservator has eliminated common and preferred stock dividends (other than dividends on the senior
preferred stock issued to Treasury) during the conservatorship; and
• because we are in conservatorship, we are no longer managed with a strategy to maximize shareholder
returns. In a letter to the Chairmen and Ranking Members of the Congressional Banking and Financial
Services Committees dated February 2, 2010, the Acting Director of FHFA stated that the focus of
conservatorship is on conserving assets, minimizing corporate losses, ensuring Fannie Mae and Freddie
Mac continue to serve their mission, overseeing remediation of identified weaknesses in corporate
operations and risk management, and ensuring that sound corporate governance principles are followed.
For additional information about our business strategy, please see “Executive Summary—Our Business
Objectives and Strategy.”
Treasury Agreements
On September 7, 2008, we, through FHFA, in its capacity as conservator, and Treasury entered into a senior
preferred stock purchase agreement, which was subsequently amended on September 26, 2008, May 6, 2009
and December 24, 2009. Unless the context indicates otherwise, references in this report to the senior
preferred stock purchase agreement refer to the agreement as amended through December 24, 2009. The terms
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