Fannie Mae-No Politics (FNMA)

[contrarian bull]

This is the problem in your argument. The senior preferreds are NOT liabilities. They are (positive) EQUITY. There is a vast difference between the two. Fannie and Freddie both list the senior preferreds as equity on their balance sheets so there is no disputing this point.

Ok... One more post about this...

What are you talking about? Did you actually READ any of the f&f 10-Q's?

Senior preferred stock is under "LIABILITIES AND EQUITY" under the sub-heading of "Stockholder's Equity". The latest fnma statement lists senior preferred here as $117,149 million bucks.

Removing the senior preferreds from the balance sheet REDUCES equity which in turn REDUCES net worth.

You do realize that this is listed under "stockholder's equity", right? Not company's equity. The companies OWE this to the stock holders. That's why it's combined with liabilities.

It all comes from Assets = Liabilities + Equity.

Right - on the latest fannie balance sheet Assets are $3,330,759 million, and the Liabilities + Equity (Which includes the senior preferred shares) also equals $3,330,759 million. Assets are equal to Liabilities and Equity, but assets are not made up of liabilities and equity.


Equity and net worth are basically the same here, at least for calculating net worth for the NWS: assets minus liabilities. If you remove the senior preferreds, FnF's combined balance sheets suffer a LOSS of $187B in equity; right now it's around $9B combined so combined equity would be NEGATIVE $178B.

Well - I know that if my mortgage company suddenly said my debt to them was zero, my net worth would go up half a million bucks. I don't see how forgiving a loan would decrease my net worth...

If you really believe this - I suggest you re-consider holding a long position in f&f.