Fannie Mae-No Politics (FNMA)

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IMHO. Many on this board have complained about the structure of the current letter agreement and the increase in liquidation preference. However, in order to protect the taxpayers (and FNMA's credit score) the commitment must be fully "drawn" to ensure the treasury is not on the hook, and capital needs to be raised to protect FNMA's credit rating.

A few months back i noticed an interesting addition to the FHFA website:
https://www.fhfa.gov/Conservatorship/Pages/History-of-Fannie-Mae--Freddie-Conservatorships.aspx

If you scroll to the bottom of the page you will notice a 2008 letter from the department of justice to Treasury Secretary Paulson regarding the US governments obligation to MBS purchasers. Despite being from 2008 THIS WAS NOT PUBLISHED ON THIS SITE A YEAR AGO. Don't believe me check web archives. https://web.archive.org/

More than half of the total 5 trillion MBS were purchased AFTER this letter. If the government were to forgive the outstanding preferred shares there would no longer providing a line of credit (per the terms of the agreement). Without capital or the explicit government backing, the outstanding MBS would lose at least some market value. Even a slight change, caused by the government, to over 2.5 trillion in MBS, would result in the loss of billions. Coupled with the DOJ opinion, it is likely that the government, and Fannie would be on the hook.

Side note, you shouldn't ignore the power of the 5 trillion debt in an industry that is 15% ish of our GDP. This is a weapon that can be manipulated to undermine FED policies, and devalue currency. In a trade war where countries are devaluing and manipulating currency there might not be a rush to give this up.

It is about power not money. We are set to average a deficit of 1.2 trillion a year for the next 10 years. Sorry, but even 50 billion a year in offset GSE profits is like throwing a hot dog down a hall way. But, the power to manipulate the economy, in the hands of the executive branch.... worth a hell of a lot more. Keep this in mind, president might want this power, but does he want to give it to the next guy? keep that in mind.

With all of that, i am long long, like 10 years +. A federal register search of related rule changes in the last year, and other gov documents show that release is being worked towards. Lawsuits are another big piece. The complexity of the whole thing is hard to grasp and it is going to be interesting.