Fannie Mae-No Politics (FNMA)

[kthomp19]

Very amateurish. Tons of capitalization errors, for example. If I had money in this "hedge fund" I would have my full redemption request in first thing tomorrow morning.

This article fails to mention why they hold any preferred shares at all. If they truly think the commons are 100% going to $30, why bother with the prefs?

When the Conservatorship was put in place and the Government stands in place of all share holders this automatically provides common shareholders contractual right.

This doesn't make sense. Imposing conservatorship doesn't cause contractual rights for commons to appear out of thin air.

When government implements a policy that serves the good of many and violates the rights of a few there must be just compensation.

This sounds good on paper, but doesn't always happen in practice. Go look at crisis-era GM bondholders.

The Government will allow the preferred to be made whole and they will be able to convert to common shares. What many fail to realize this will occur once common shares are worth $30 a share.

I could actually see this happening following a 1-for-10 reverse split.

The Government is not giving away profit that they can take for themselves. The Government realizes that maximizing the price of common shares of the GSEs maximizes their return. Why would the government do anything that has common shares decrease in value, it doesn’t make any sense.

The problem here is that pricing a secondary offering anywhere near $30 per share gives the new buyers so little of the companies that they won't bother helping with the recap.

In fact, this article completely ignores the coming secondary offering. Bill Ackman knows that it's coming, why doesn't this "hedge fund"?

Eventually the Extra funds taken during the NWS will have to be returned and when this happens the GSEs will be appropriately capitalized.

This is just plain wrong. These "extra funds" amount to $20.7B, not nearly enough to meet even Watt's lower minimum capital requirement alternative of $103.5B. Calabria, and the presidential memo, make it clear that the pre-conservatorship capital standards weren't nearly high enough. Watt's numbers ($150-200B of risk-based capital) have been confirmed by Otting and Carson.



I also can't find this article anywhere else online. Probably because any website worth its salt would be embarrassed to publish it.