Fannie Mae (FNMA)

[TRCPA]

If I am reading this correctly, we may be looking at the following.

1) An agreement to have Fannie/Freddie receive the $20 billion they have previously earned in profits over the last year

in exchange for

2) X number of common shares

Probably by the end of 2019.

As always, the devil is in the details.

If true,

1) How many common shares would be converted and at what price?

2) What happens to the PRIOR overpayment to treasury?

What I think they may be angling for is this. The Treasury getting cheap shares now or by EOY that are certain to appreciate greatly in value in the future.....in exchange for the $20 billion back in the GSE coffers by year end.

If so, we might then be looking at $20 billion + Treasury credit due of $25 or$30 billion to start the recap process, for a total of about $50 billion in capital at 12/31/19. (Close to that stress test amount we talked about yesterday).

That might be the point where they free the GSE's from conservatorship, alongside the consent agreement. They would then need to raise about $75 billion (for total of $125 billion) in 2020, through future profits retained and public offering.

Looking at Fannie alone, that would require about $50 billion needed.

So if Fannie makes another $7 billion or so in profits by 6/30/20, the remaining offering requirement would be about $43 billion.

This would ramp up the interest on what happens at 9/30/19 even higher.