Fannie Mae-No Politics (FNMA)

[YanksGhost]

Problem is, as I believe you would concur, that no Moelis-style recap can occur until the lawsuits are basically settled. But, to date, I have yet to see where even ONE plaintiff team has indicated a willingness to give in and settle... even in principle.

This, to me, favors a recap from organic growth (retained earnings) and a minimum of administrative action.

In such case, I would expect common shares to get a spike from the end of NWS (required, in any case for capital formation) and S/P growth at a slow growth upswing until/if Congress acts on some overall legislative reform. How fast/how much will depend on capital standards adopted by FHFA and the impact of pending litigation and whether some capital walkbacks get added to the mix.

I would prefer some speedier resolution, but in my scenario commons will continue an advance and JPS will stagnate since no dividend restoration will be possible until some capital threshold is reached that makes the GSEs release-eligible. At such time, JPS will have their eventual day, as well.

JMO.