Fannie Mae-No Politics (FNMA)

[kthomp19]

#1, I agree.
#2 involves Treasury just writing a giant check to FnF. Not going to happen.
#3 is dangerous, because Treasury's funding commitment is part of the SPSPAs. Without that, if FnF actually go into balance sheet insolvency (not all that hard given their capital buffer of 0.1% of assets), they would go into mandatory receivership after 60 days unless Treasury bails them out again.
#4 also amounts to Treasury writing a giant check, this time to current common shareholders. Treasury has no reason to give up that much money.
#5 simply reinstates one item from the original SPSPAs (the funding commitment). This is an explicit form of risk to taxpayers, and one that can be avoided by simply doing a large equity raise (which Ackman believes will happen) first.
#6 doesn't make sense for two reasons: first, FHFA is the only one that can set FnF's capital requirements, and second, there are statutory requirements that cannot be set "in phased manner". I do agree with the "appropriate for monoline insurance companies" part, though Calabria might not.
#7 is only possible after a full recap. Calabria's job as conservator is to restore FnF to a sound and solvent status (including meeting all regulatory capital requirements), so his job is not done (and therefore he cannot release the companies) until they are fully recapped.
#8 is therefore moot, because a full recap will happen before release.
#9 is fine.
#10 is out of place; the lawsuits have to be settled before the recap can happen. This needs to move up between #6 and #7.
#11 is fine, because it won't ever happen.
#12 will never happen. It would take Congress to repeal that part (or all) of HERA, and laws very, very rarely get repealed.

These are the required steps in logical sequence for successful release and rehabilitation of FnF as private share holder companies.

Naturally, I disagree with this assertion, given the above.

These steps will end Gov control and FHFA conservatorship control of FnF in compliance with Trump White House Directive.

Here is a link to the memo in question.

Section (1)(iii) directly addresses the need to minimize taxpayer risk:

(iii) Establishing regulation of the GSEs that safeguards their safety and soundness and minimizes the risks they pose to the financial stability of the United States; and

A government line of credit is exactly the opposite, exposing taxpayers to direct risk if FnF ever go under (on a balance sheet basis) again. An instant full recap, on the other hand, complies with this part.

The entirety of section (1)(xi)(C) also argues against the use a government line of credit instead of hard equity capital (emphasis added):

(xi) Setting the conditions necessary for the termination of the conservatorships of the GSEs, which shall include the following conditions being satisfied:

(C) The GSEs are subjected to heightened prudential requirements and safety and soundness standards, including increased capital requirements, designed to prevent a future taxpayer bailout and minimize risks to financial stability.

If FnF ever have to draw on this government line of credit you talk about, IT WILL BE A TAXPAYER BAILOUT. According to the memo, this prevention must be in place before FnF are released. That means fully meeting all capital requirements. Why else would paragraph (C) even be included?

It is crystal clear: the presidential memo supports full recap before release, and cannot be twisted around to be construed as allowing for a release before full recap.

Since release before full recap is a central tenet of your plan, I do not think that your plan has any chance of happening. It directly contradicts (1)(xi)(C) of the memo.