Fannie Mae-No Politics (FNMA)

[big-yank]

Fannie Mae's share price sank from around $20.00/share in July, 2008 to $7.08 on September 5, 2008... immediately prior to the conservatorship being announced which included the warrants. Fannie Mae had 1.1 B shares outstanding, yielding a market cap of $7B.

The Fannie Mae board voted to exchange 79.9% of equity, valid for 20 years, and a 10% SPD on any funds drawn from U.S. Treasury in exchange for a bailout backstop of as much as $100 billion. There was NOTHING inherent in this transaction that violated any aspect of constitutional law. It is a pure and simple contract transferring property between two parties, with each receiving valuable consideration. In fact, a substantial case could be made that the government got badly cheated by getting warrants worth only 4/5th of Fannie's market cap or around $6.2 B in exchange for a $100 B financial backstop arrangement.

Now if you want to argue about subsequent dealings in the Amendment 3 imposition, that would potentially be a different matter altogether. But that has nothing to do with the warrants.

JMHO.