Fannie Mae-No Politics (FNMA)

[kthomp19]

There is a good chance that Fannie will make no NWS payment to Treasury for Q1 since their net worth began the quarter at negative $5 billion.

I don't think that's true. The whole point of the draw on March 30 was to get rid of the net worth deficiency. Fannie and Freddie should have net worth of zero as of December 31, 2017 (or is it February 14, 2018, the date of the filing?). Anything after that is just building up profits, so we could very well see an actual NWS payment to treasury on June 30 if Fannie and/or Freddie make over $3B in profits during Q1.

Remember, if Fannie or Freddie has a negative net worth for 60 consecutive days then HERA mandates that Watt put them into receivership. No ifs ands or buts. That's why the draw happened.

No reason he could not write that same letter, but change that "3" to "100" and strike out the paragraph about increasing the liquidation preference.

What is Treasury's incentive to get rid of the increase in liquidation preference? The increase was their incentive to sign the letter agreement last December. With your version they are just foregoing NWS dividends without getting anything in return.

It's true that Treasury can do this, but given that they got an increase in liquidation preference on the letter agreement (i.e. extracting their pound of flesh over a relatively small amount), I can't see them just bending over like this.