Fannie Mae-No Politics (FNMA)

[kthomp19]

This is actually funny. I finally found incontrovertible proof that the warrants are NOT collateral, and it's thanks to this post!

Look at the report linked to in that post, on page 8.

Fannie Mae and Freddie Mac may emerge from conservatorship to resume independent operations, or they may emerge in some other form reflecting legislative changes to their congressional charters . Conservatorship preserves the status and claims of the preferred and common shareholders. The value of the warrants issued to the government under the terms of the PSPAs could potentially increase, thereby providing enhanced value to the taxpayers.

Now think about this logically. The only way that the warrants have value is if FnF are recapped and released. The only way that FnF can be recapped and released is if they have paid off the senior preferred shares, which represent Treasury's investment.

That means that using the warrants as collateral never would have worked: if the warrants are worth enough to matter, then Treasury would have made all its money back anyway. It's clear from this report that Treasury viewed the warrants as additional upside to its investment and not collateral at all.



So please, everyone, quit with the wishful-thinking argument that the warrants will be cancelled because FnF paid Treasury back all the draw money. If the warrants somehow do get cancelled, it won't be for that reason. FnF having paid Treasury that money does not make the warrants invalid or illegal.