Fannie Mae-No Politics (FNMA)

[kthomp19]

A "forgiving" of the SPS would drive up the price even though equity has not changed. The market would react to it as though the net worth has increased.

I agree that the share price will go up. "Forgiving" the senior preferreds in this case is a result of retroactively revoking the NWS (since both companies have now passed the 10% moment), which is what most of the court case plaintiffs want.

The argument I was trying to refute says that retroactively revoking the NWS amounts to an instant recap in the amount of $187B. I believe even the ab initio revocation would still leave a large need for capital to satisfy any post-release capital requirements. That could very well happen through a series of equity raises. This possibility is important to me because it affects how I want to split my FnF investment between the commons and junior preferreds.