Fannie Mae-No Politics (FNMA)

[ease2002]

If you can’t beat’em join’em

-Sold common and converted to prefereds

-From a congressional view, shareholders are one of several prorities for housing reform, and from an objective perspective the reform can be handled in a two step process where government backing for new mortgage structure is guaranteed with new entity (Ginnie Mae?) and secondary market through new companies. Fannie and Freddie capital structure is sold or reassigned. Depending on simplicity or complexity of plan will determine difficulty in passing legislation

-Possibiity of 60 votes in senate may not happen in 2018 but government backing for affordable housing advocates could eventually get enough to pass votes eventually

-Paulson (prefereds) was first to back Trump, Trump doesn’t care as much about commons. Commons may get something but it will be scraps = heavy dilution

-Probably most important is caveat emptor = buyer beware - if you bought shares in a company in conservtorship and there is horrible dilution for commons, you knew what you were getting into. What this means is legal standing for shareholders is shaky. Legal track record is abissmal

-For me wildcard is Ackman - what are his options if prefereds (Paulson, et al) are made whole and now Ackman is left on an island to influence lawmakers while everyone else is appeased?

-Corker/Warner want to make a deal and do enough to get it passed - commoners may not lose but they will be paid last