Fannie Mae-No Politics (FNMA)

[Fully Diluted]

Hi andydub,

since the matter is somewhat complicated, I will proceed step by step:

Yes, as you say the agreement precludes any reduction in LP.

The liquidation preference(LP) consists of the initial LP of 1 billion dollars, the bailout amount and the dividends accrued and not paid.
Only the unpaid dividends can be repaid according to the SPS certificate. This leaves the LP at a minimum of around 85 billion dollars (FNMA).

Calabria and Mnuchin can agree on a 4th amendment and declare the taxpayer compensated. Then it doesn't matter. When finding the remedy in the en banc case, however, the above can play a role - wait and see.

The only way would be for both parties to agree to amend (perhaps even completely abrogate, though I think that unlikely) the agreement to deem the previous payments to have paid down the LP.

That's just one way to get rid of the LP. But when it comes to recapitalization, the most important thing is the core capital. And this is where the dog lies buried: Fannie's $120 billion SPS does not count as core capital because it is cumulative. That brings the core capital to a negative value of just over 120 billion dollars. This makes it impossible to even think about recapitalization.

The following possibilities exist to solve the SPS problem:
1. convert SPS to non-cumulative
2. clear SPS
3. convert SPS into common stock

The 3rd possibility would be suspect as long as there are the other possibilities that lead to similar results. Because the SPS is non-convertible by design - not without reason.

This time it would be Mnuchin and Calabria conspiring on the amendment

Calabria and Mnuchin only have the above 3 options to change the SPSPAs in order to a release.

GLTY