Fannie Mae-No Politics (FNMA)

[kthomp19]

Why would Treasury send $122 B to FnF?

A court order. One, though, that would certainly be appealed by Treasury.

The only thing that would make this palatable to Treasury is if they could then convert the seniors (which would exist intact, with its $193B liquidation preference and 10% cash dividend rate) into enough commons to make up the difference. Then there would be the equivalent of the secondary offering, but conducted at a slower rate while Treasury unwinds its position.

I think a senior conversion would be much more dilutive to the commons than the warrants would, but there would be no need for a secondary offering. It probably washes out in the end, with current common shareholders left with around 2-4% of the equity either way.

I thought they would never write a check to the GSEs. Have you changed your mind?

I meant that Treasury won't voluntarily write a check to the GSEs. As in no raising the strike price of the warrants, no voluntary return of money past the 10% moment, nothing.