Fannie Mae-No Politics (FNMA)

[YanksGhost]

Here's today's $97 billion Moelis question on recapitalization.

For Moelis to be feasible, $97 billion (combined F&F) must be raised from "soft capital" sources such as the issuance of Credit Risk Transfer securities, CRT's, as well as from reinsurance which is another issue for later posts. These are high yield bonds, right? Is this where the payday for Moelis backers really comes from?

And at what cost to shareholders to de-risk and de-lever via CRT's? Moelis is all consumingly interested in shedding high coupon JPS by conversion to commons. Then why replace it with even higher paying CRT's with junk-bond-style rates that may be even more costly?

How would this work to anyone's benefit except those bond buyers addicted to high yields on CRT's?