What Is the Net Worth Sweep?
When the government placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury provided funding through Senior Preferred Stock Purchase Agreements (PSPAs). In exchange, the companies owed Treasury a fixed 10% annual dividend on funds drawn — a standard arrangement similar to what AIG, GM, and the banks received.
On August 17, 2012, Treasury and FHFA secretly executed the Third Amendment to the PSPAs. This replaced the fixed 10% dividend with a “variable dividend” equal to 100% of each company's net worth above a small capital reserve. Every dollar of profit would now flow directly to Treasury — not 10%, not 50%, but all of it, forever.
This was not an accident. Internal government documents later revealed that Treasury officials knew Fannie and Freddie were about to become massively profitable. The sweep was designed to capture those profits before they could be used to rebuild capital and repay shareholders. Unlike every other bailed-out institution, the government never let Fannie and Freddie exit on their own terms.
The result: Fannie and Freddie have paid Treasury approximately $301 billion — far more than the $191 billion they drew during the crisis. Shareholders — common and preferred alike — have received nothing.
Why It Matters
$301B
Total paid to Treasury by Fannie Mae and Freddie Mac under the Net Worth Sweep
$191B
Total drawn from Treasury during the 2008 financial crisis — the so-called “bailout”
$110B+
Overpayment above and beyond what was drawn — none returned to shareholders
Every other bailout recipient was allowed to repay and exit
AIG repaid $182 billion and the government made a $22.7 billion profit. GM repaid and went public again. The banks repaid TARP. Only Fannie and Freddie were trapped in perpetual conservatorship while having their profits swept.
Shareholders lost everything despite the companies thriving
Common shareholders saw their stock decimated. Preferred shareholders — who purchased securities with a contractual right to dividends — have not received a payment since 2008. The companies are profitable. The money just goes to the wrong place.
Timeline of Key Events
Conservatorship Begins
FHFA places Fannie Mae and Freddie Mac into conservatorship. Treasury provides Senior Preferred Stock Purchase Agreements (PSPAs) with a 10% annual dividend on funds drawn.
$187 Billion Drawn
Fannie and Freddie draw approximately $187 billion from Treasury during the financial crisis. Non-cash accounting write-downs — not actual operating losses — account for the majority of draws.
The Third Amendment (Net Worth Sweep)
Treasury and FHFA secretly amend the PSPAs. The fixed 10% dividend is replaced with a sweep of ALL net worth above a small capital reserve ($3 billion, declining to zero). Every dollar of profit now goes directly to Treasury — forever.
Profits Explode
Fannie Mae reports $5.1 billion in net income for Q3 2012. The companies were already returning to massive profitability when the sweep was imposed. Internal documents later revealed the government knew this.
Record Profits Swept
Fannie Mae earns $84 billion in 2013, its most profitable year ever. Freddie Mac earns $48.7 billion. Every dollar is swept to Treasury under the Third Amendment.
Perry Capital Lawsuit Filed
Perry Capital files suit challenging the Net Worth Sweep in federal court. Dozens of additional lawsuits follow from shareholders across the country.
Fairholme Lawsuit Filed
Bruce Berkowitz and Fairholme Funds file suit in the Court of Federal Claims, arguing the Net Worth Sweep constitutes an illegal taking of shareholder property.
Smoking Gun Documents Released
Unsealed documents reveal Treasury officials discussed the sweep as a way to prevent the companies from ever building capital and repaying shareholders. Internal emails show the government knew the companies were about to become highly profitable.
Perry Capital Appeal Denied
The D.C. Circuit Court of Appeals rules against Perry Capital, finding HERA bars judicial review of FHFA actions during conservatorship. A devastating blow to shareholders.
Capital Reserve Letter Agreement
Treasury allows Fannie and Freddie to retain $25 billion and $20 billion respectively, ending the full sweep. Retained earnings begin to slowly build, but the damage is done.
Collins v. Yellen — Supreme Court
The Supreme Court rules FHFA's leadership structure unconstitutional and remands the case on the Net Worth Sweep claims. SCOTUS removes FHFA Director Mark Calabria. Sandra Thompson becomes Acting Director.
Retained Earnings Build
Fannie and Freddie continue building capital through retained earnings. Combined net worth grows past $140 billion. The companies are operationally ready for release from conservatorship.
New Administration
Treasury Secretary Scott Bessent and FHFA Director Bill Pulte publicly discuss GSE recapitalization and release from conservatorship. The political environment is the most favorable it has been in over a decade.
The Fight Continues
Total payments to Treasury: approximately $301 billion. Total drawn: $191 billion. Overpayment: $110+ billion. Shareholders still await a resolution. Recap and release remains the endgame.
Frequently Asked Questions
Key questions about the Net Worth Sweep, Third Amendment, and the fight for Fannie Mae and Freddie Mac shareholders.
What is the Net Worth Sweep?
The Net Worth Sweep is a change to the Preferred Stock Purchase Agreements (PSPAs) between the U.S. Treasury and Fannie Mae and Freddie Mac. Imposed on August 17, 2012, the Third Amendment replaced the original fixed 10% annual dividend with a sweep of all net worth above a small capital reserve. This means 100% of profits are sent to Treasury every quarter, preventing the companies from building capital or ever repaying shareholders.
How much have Fannie Mae and Freddie Mac paid Treasury?
As of 2025, Fannie Mae and Freddie Mac have paid Treasury approximately $301 billion in dividend payments under the Net Worth Sweep. They originally drew approximately $191 billion during the 2008 financial crisis, meaning they have overpaid by more than $110 billion. Unlike AIG, GM, and the banks, they were never allowed to repay and exit government control.
What is the Third Amendment to the PSPAs?
The Third Amendment is the legal mechanism that created the Net Worth Sweep. The original PSPAs (September 2008) required Fannie and Freddie to pay Treasury a fixed 10% annual dividend on funds drawn. The Third Amendment (August 2012) replaced this with a variable dividend equal to 100% of each company's net worth above a small capital reserve, effectively seizing all future profits forever.
Why did the government impose the Net Worth Sweep?
Internal government documents released through litigation reveal that Treasury officials imposed the sweep because they anticipated Fannie and Freddie would soon become massively profitable. Without the sweep, the companies would have repaid their obligations and rebuilt capital, which would have undermined the government's stated goal of winding down the GSEs. Critics argue it was designed to prevent shareholders from ever recovering their investments.
What happened in Collins v. Yellen?
Collins v. Yellen was a shareholder lawsuit that reached the Supreme Court in 2021. The Court ruled that FHFA's single-director-removable-only-for-cause structure was unconstitutional, leading to the removal of Director Mark Calabria. However, the Court remanded the Net Worth Sweep claims back to lower courts rather than ruling directly on the legality of the sweep itself.
Are Fannie Mae and Freddie Mac profitable?
Yes. Fannie Mae and Freddie Mac are among the most profitable companies in America. They have been consistently profitable since 2012. Fannie Mae alone earned $84 billion in 2013. The companies guarantee approximately half of all U.S. home mortgages, representing over $7 trillion in assets. Their profitability is why the Net Worth Sweep transferred so much wealth to Treasury.
What is recap and release?
Recap and release refers to the process of recapitalizing Fannie Mae and Freddie Mac (building sufficient capital reserves) and releasing them from government conservatorship. This would restore them as private, shareholder-owned companies. Proponents argue the companies have already repaid their obligations many times over and should be allowed to exit conservatorship. As of 2025, the current administration has expressed support for this path.
How does the Net Worth Sweep affect shareholders?
The Net Worth Sweep effectively wiped out the economic rights of both common and preferred shareholders. By sweeping all profits to Treasury, shareholders receive no dividends and the companies cannot build the capital needed to exit conservatorship. Junior preferred shareholders — who purchased securities with a contractual right to dividends — have been particularly harmed, as their dividend rights have been suspended since 2008.
8 Books Documenting the Fight
Glen Bradford has written one book per year for 8 years chronicling the Net Worth Sweep, the lawsuits, and the path to recap and release.
Skin in the Game
I own Fannie Mae and Freddie Mac junior preferred shares. My entire net worth is concentrated in this position. I started buying in 2014, sold all common in 2016, and converted everything into junior preferred. I have written 8 books, published 300+ articles on SeekingAlpha, and spent a decade documenting this case.
“I don't recommend things I don't own. I don't own things I wouldn't recommend.”
Get Glen's Musings
Occasional thoughts on AI, Claude, investing, and building things. Free. No spam.
Unsubscribe anytime. I respect your inbox more than Congress respects property rights.
Keep Exploring
Fanniegate: The Full Story
The complete timeline, evidence, blog posts, and 8 books documenting the largest fraud in American capital markets.
Read moreScreenplayFANNIEGATE: The Movie
The full screenplay. $7 trillion. 17 years. The biggest fraud dramatized.
Read moreCurrent Positions
Every ticker Glen holds. 26 series of junior preferred stock across Fannie Mae and Freddie Mac.
Read moreTrack Record
Glen's investment returns, documented publicly over a decade.
Read moreFannie Mae Preferred Stock
Deep dive into FNMAS, FMCKJ, and the full basket of GSE junior preferred shares.
Read moreNewInvestor Community
Weekly deep-dives, real-time position updates, and direct Q&A with Glen. $20/month.
Read more