Fannie Mae-No Politics (FNMA)

[big-yank]

Sure. Great question. Here's the easy, simple answer. If government owns more than 50% of the GSEs, it must then put whatever portion of $5 T of GSE debt that they own onto the government's balance sheet and add it to the national deficit. Exactly as happened when government owned 100% of Fannie Mae prior to 1968 when LBJ initially privatized it. This blows up the debt ceiling, the governmnent's credit rating and it's global financial status. It is also likely that the near junk bond status of the Federal debt, as it is retired and gets reissued, will be at so costly a higher interest rate as to render the government insolvent.

So the government simply will NOT exercise the warrants as written. They quite likely would be willing to negotiate a settlement where the warrants for common stock get exchanged for some other benefit such as a new class of non-voting junior preferred shares, debentures or some similar rights offering.

Let's please put this non-starter to bed, once and for all. THIS WILL NEVER HAPPEN.

JMHO.