Fannie Mae-No Politics (FNMA)

[kthomp19]

The really stupidest argument that circulates here on the board is that the common stock would be damaged if the 2 warrants were cancelled.
How confused do you have to be to really believe that?!

There are two people you should take this up with: Tim Howard and Bill Ackman. Both are on record as saying that the reason they think the commons won't be destroyed is because Treasury has an interest in keeping the share price up to maximize the value of the warrants. That means if Treasury up and cancels the warrants, or sells them for a fixed sum, that incentive disappears.

Mnuchin then no longer protects our shares? So what?!

Mnuchin is one of the two most powerful people involved in the recap and release effort. Calabria already has no fiduciary duty to shareholders (he won't, and is not obligated to, care if there is massive dilution), so removing the incentive for Treasury to prop up the share price removes the floor entirely.

Nevertheless, he still cannot give away our Fannie for free, or more than 79.9% of it! And that he would have to do, so that the common shareholders would be worse off without warrants.

It's not Treasury that would be giving away everything, it's FHFA. FHFA has no qualms about giving away more than 79.9% of the equity. In fact, if the new buyers demand that much or more, FHFA will have to fork it over or else have the recap (and thus the release) fail.