Fannie Mae-No Politics (FNMA)

[YanksGhost]

If the liquidation preference in Senior Preferred Shares is cancelled with release from conservatorship and termination of the risk of receivership/liquidation and the warrants are rescinded since no further collateral is required when the bailout and 10% interest has been fully paid on them, all that remains in play is the restoration of capital. Unencumbered from the liquidation-preference-driven accumulated deficit F&F combined would need a capital restoration of about $80 B to return to what was deemed a safe and sound capital position prior to conservatorship.

My estimate is that immediately upon such release and voiding of warrants, common S/P would rise to around $30 initially. So we float 1.6 B common shares @ $30 in Year 1 = 48 B. Retained earnings go 100% to capital build. Year 2: junior preferred dividends get restored. $20 B in new junior preferred shares are issued at current market rates. The balance of retained earnings go to complete the capital build.

Going into year 3, common dividends get restored and common S/P shoots up to somewhere between $60 and 100 depending on any further increases imposed by the enterprises regulator or by new Congressional action. Once fully capital-loaded, F&F's combined income of $20 B at a 10X multiple would be approximately $200, split into S/P of $125 for FNMA and $75 for FMCC on a share pool of 3.2 B common shares.

This is The Yank Plan. No massive dilution. Simple. Quickly achieved. No change to affordable housing availability. No restraint on Congress' ability to structure more comprehensive reform laws. No stakeholder losers, just winners.

Now feel free to bash away.